Vanguard planning to launch Ultra-Short Bond ETF

Vanguard has filed an initial registration statement with the Securities and Exchange Commission to launch the Vanguard Ultra-Short Bond ETF, an actively managed fund which will offer a low-cost, diversified option for investors seeking income and limited price volatility. 

Vanguard Fixed Income Group will serve as investment advisor to the new ETF, which is expected to launch in the second quarter of 2021.

“We are excited to present investors with a new solution for managing short-term cash needs and to offer our world-class active fixed income expertise through an ETF,” says Kaitlyn Caughlin, head of Vanguard Portfolio Review Department. “Vanguard’s history of competitive active performance is enabled by rigorous fund oversight, access to a diverse roster of active management talent, and our ability to keep costs low.”

The ETF will invest in a diversified portfolio consisting of high-quality and, to a lesser extent, medium-quality fixed income securities, including investment-grade credit and government bonds. With an expected average duration of approximately one year, the ETF’s interest rate risk sits between money market funds and short-term bond funds, offering investors a solution for anticipated cash needs in the range of six to 18 months. It will have an estimated expense ratio of about 0.10 per cent, compared with the average expense ratio for ultra-short-term bond ETFs of 0.22 per cent.

Vanguard Ultra-Short Bond ETF will be Vanguard’s first active bond ETF. Vanguard currently offers the USD16.0 billion actively managed Vanguard Ultra-Short-Term Bond Fund, which debuted in 2015. The new ETF will be separate from, but have a similar strategy to, the existing mutual fund and will offer investors and advisors the ability to trade at intraday market prices and invest by buying one share. The ETF will be managed by the same portfolio management team as the mutual fund.

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