Vanguard Launches Total Corporate Bond ETF

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Nov 09, 2017, 08:30 ET

VALLEY FORGE, Pa., Nov. 9, 2017 /PRNewswire/ -- Vanguard today launched Vanguard Total Corporate Bond ETF (VTC), expanding its U.S. fixed income fund roster to 17 ETFs and 51 indexed and actively managed mutual funds. The fund offers investors low-cost exposure to the broad U.S. investment-grade corporate bond market through a single fund.

"The Total Corporate Bond ETF provides investors with a core portfolio building block and is a welcome addition to Vanguard's diversified lineup of low-cost bond ETFs," said John Hollyer, global head of Vanguard Fixed Income Group.

The new fund seeks to track the Bloomberg Barclays U.S. Corporate Bond Index and trades on the NASDAQ stock exchange with an expense ratio of 0.07%¹. It is structured as an ETF of ETFs, investing directly in Vanguard's three existing, low-cost corporate bond ETFs: Vanguard Short-Term Corporate Bond ETF (VCSH), Vanguard Intermediate-Term Corporate Bond ETF (VCIT), and Vanguard Long-Term Corporate Bond ETF (VCLT).

The ETF of ETFs structure enables the fund to immediately access more than 5,500 U.S. corporate bonds by taking advantage of the existing exposure and scale offered by the underlying ETFs. This approach achieves near complete replication of the benchmark at the fund's inception as well as tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark's constituents.

Evaluating ETFs beyond expenses

Low costs are a critical component to long-term investment success. Vanguard continues to be the industry's across-the-board cost leader: 99% of Vanguard's US-domiciled mutual funds fall within the industry's lowest cost decile and 99% of Vanguard's US-domiciled ETFs fall within the lowest cost quartile of all ETFs².

While the expense ratio is a meaningful metric in the ETF evaluation process, Vanguard encourages investors to examine other factors.

"As mutual fund and ETF costs continue to compress, the relative benefit to choosing the cheapest fund diminishes," said Rich Powers, Vanguard Head of ETF Product Management. "When choosing among similarly priced funds, we suggest investors consider elements beyond the expense ratio, such as investment strategy, methodology, tracking difference, spreads, tax efficiency, and brand."

Vanguard: a fixed income leader

Vanguard Fixed Income Group serves as the investment advisor to the Total Corporate Bond ETF. The Fixed Income Group manages approximately $1.3 trillion in assets and employs more than 150 investment professionals across the globe. Through September 2017, Vanguard's global lineup of 111 fixed income mutual funds and ETFs have experienced more than $125 billion in global cash flow, $30 billion of which has been directed to bond ETFs.

About Vanguard
Vanguard is one of the world's largest investment management companies. As of September 30, 2017, Vanguard managed $4.7 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 376 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.

Asset figures as of September 30, 2017, unless otherwise noted.

¹Estimated as of November 9, 2017

²Source: Morningstar, Inc. as of March 31, 2017

For more information about Vanguard funds and ETFs, visit vanguard.com or call 800-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

Vanguard Marketing Corporation, Distributor of the Vanguard Funds.

All investing is subject to risk, including the possible loss of the money you invest.

Diversification does not ensure a profit or protect against a loss.

Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments.

SOURCE Vanguard