Vanguard Launches First ETF in Nearly 2 Years
Vanguard Group Inc. launched its first exchange-traded fund in nearly two years, which focuses on municipal bonds as investors are flocking to cash alternatives in slumping markets.
The Vanguard Short-Term Tax-Exempt Bond ETF (VTES) launched on Thursday and tracks an index of muni bonds with maturities between one month and seven years, according to a company statement. The fund charges an expense ratio of 0.07%.
The launch comes as investors have looked to fixed income funds to shield themselves from slumping markets. Stocks slumped yesterday in the aftermath of Federal Reserve Chair Jerome Powell signaling during an appearance in front of Congress that the central bank may raise rates higher than previously anticipated if the U.S. economy shows little chance of slowing.
Treasury yields spiked on the announcement, as the policy-sensitive two-year Treasury note topped 5% on Tuesday for the first time since 2007.
Fixed income funds have brought in nearly $23 billion year to date, the second highest of any asset class. The most popular among those have been short-term bond ETFs focused on instruments like Treasury bills and municipal debt.
The top asset-gathering muni ETFs, the Vanguard Tax-Exempt Bond ETF (VTEB) and the Invesco National AMT-Free Municipal Bond ETF (PZA), have lured in nearly $893 million year to date, according to ETF.com data.
The fund aims to follow the traction seen for VTEB, “especially given the heightened demand for fixed income ETFs,” according to Sara Devereux, global head of fixed income at Vanguard.
“We're hearing from investors who want to minimize their tax liability through an ETF at the short end of the yield curve, and VTES fits that need,” Devereux added in emailed comments to ETF.com.
Vanguard currently manages nearly $2 trillion across its 81 U.S.-listed ETFs, second only to BlackRock’s iShares unit, which has nearly $2.3 trillion in 392 funds, according to ETF.com data.
Steve McFee will serve as portfolio manager for VTES, according to the company statement.
Contact Shubham Saharan at shubham.saharan@etf.com
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