Vanguard Group, the world’s second-largest asset manager, plans to launch two ETFs in the first quarter of next year that it said are designed to help investors manage their short-term liquidity needs.
The Vanguard Ultra-Short Treasury ETF, which will have the ticker symbol VGUS, and the Vanguard 0-3 Month Treasury Bill ETF, which will have the ticker VBIL, will be index ETFs, a Vanguard news release said.
The new ETFs can serve as part of an investor’s “liquidity toolkit,” given that “both will offer exposure to U.S. Treasury securities, have short durations and low volatility, and are expected to have tight bid-ask spreads,” the news release said.
“VGUS and VBIL can be a solution for those who rely on ultrashort bond funds and ETFs to manage their liquidity needs,” said Daniel Reyes, a principal and global head of Vanguard portfolio review department, in the release. “These new ultrashort Treasury ETFs fill the gap between Vanguard’s money market funds and our existing ultrashort-term bond offerings, enabling investors to build portfolios with greater precision using Vanguard ETFs.”
VGUS will hold Treasuries with maturities of less than 12 months, while VBIL will focus on Treasury bills that mature in three months or less. Each of the ETFs is expected to launch with an expense ratio of 0.07%, “which will position each ETF as the low-cost leader in its respective category,” the release said.
“Ultrashort bond ETFs are in high demand,” said Bryan Armour, director of passive strategies research for North America at Morningstar Research Services, a Morningstar subsidiary, adding that this year through Oct. 31 such U.S.-listed ETFs have attracted $34 billion in net inflows.
“Investors’ direction of travel is toward ETFs, so we have seen new ETFs come to market to capture cash allocations,” Armour said in an email. “Notably, BlackRock just filed for a money market ETF, and these (Vanguard) ultrashort Treasury ETFs provide a high-quality alternative with under 12-month or 0-3 month options.”
While the release said the two new ETFs will offer low-cost Treasury exposure for individual investors and financial advisers, a Vanguard spokesman added that some institutional investors may also find them appealing.
“Many institutional investors have access to high-quality liquidity management tools, including money market funds and stable value funds,” the spokesman said in an email. “However, institutional investors who have a preference for the ETF wrapper or who are looking for targeted exposure to the short end of the yield curve might have interest in VGUS and/or VBIL.”
As of Oct. 31, Vanguard had $9.9 trillion in assets under management globally, including $3.1 trillion in global ETF assets, the spokesman said.
