Vanguard Group plans to launch a new actively managed fixed-income exchange-traded fund, the Vanguard Multi-Sector Income ETF, according to an SEC filing March 24.
The ETF, which is expected to begin trading June 9 under the ticker symbol VGMS, will be the sister of an existing mutual fund, the Vanguard Multi-Sector Income Bond Fund, which trades under the tickers VSMAX (for Admiral shares) and VSMIX (Investor shares).
The ETF will invest in a variety of fixed-income securities that are high-quality, medium-quality and lower-quality bonds, commonly known as junk bonds, across several fixed-income sectors, including emerging markets, the filing noted.
VGMS will carry an annual expense ratio of 0.3%, which is the same as the fee for VSMAX, but below the 0.45% fee for VSMIX.
According to Vanguard’s website, VSMAX has $153.5 billion in assets under management, while has VSMIX has $238 million. For the year ended Feb. 28, VSMAX had a total return of 8.9%, vs. 8.3% for its benchmark.
Jeff DeMaso, editor and founder of The Independent Vanguard Adviser, an independent financial newsletter focused on Vanguard mutual funds and ETFs, said the launch of VGMS could lead to more actively managed bond ETFs from the investment giant.
“The most interesting aspect of this ETF, in my opinion, is that it opens the door for Vanguard to launch a junk bond ETF and an ETF version of its diamond-in-the-rough Emerging Markets Bond,” he wrote in a March 24 note. DeMaso added that “what really catches my eye today is what it signals for the future. Now that Vanguard is willing to launch an actively managed ETF loaded with junk and emerging market bonds, I expect we’ll see ETFs focused on each of those sectors. Vanguard hasn’t offered a junk bond ETF, active or index, which is an obvious gap I’ve been waiting for Vanguard to fill.”
With respect to emerging markets bonds, DeMaso noted that Vanguard has offered an index-based ETF, Emerging Markets Government Bond ETF, which trades under the ticker VWOB, since 2013.
A Vanguard spokesperson said the firm currently offers five actively managed fixed-income ETFs: Vanguard Ultra-Short Bond ETF, Vanguard Core Bond ETF, Vanguard Core-Plus Bond ETF, Vanguard Core Tax-Exempt Bond ETF and Vanguard Short-Duration Tax-Exempt Bond ETF. These ETFs trade under the tickers VUSB, VCRB, VPLS, VCRM and VSDM, respectively, and have about $7.8 billion in combined AUM.
In January, Vanguard announced plans to introduce Vanguard Short Duration Bond ETF, an active fixed income ETF that will trade under the ticker VSDB and is expected to launch in early April.
“We expect the active fixed-income ETF product space to see continued growth as ETFs become the vehicle of choice for a wider array of investors,” the spokesperson added.
