Vanguard Seeking An Actively Managed ETF To Protect Against Inflation

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December 1, 2009 4:57pm ETF BASIC NEWS

inflation“The Vanguard Group is seeking a regulatory exemption that would permit its Inflation-Protected Securities Fund (VIPSX)


 to issue a class of exchange-traded shares. If granted, the exemption would create Vanguard’s first actively managed ETF. Vanguard first proposed the ETF to the U.S. Securities and Exchange Commission in 2007, but at that time it had proposed revealing only a portion of the ETF’s holdings. In a filing last week, however, it proposed an ETF that would be fully transparent,” Daisy Maxey Reports From The WSJ.

“We’ve had a lot of demand, a lot of interest,” said Ken Volpert, principal, senior portfolio manager and head of the taxable bond group at Vanguard. “So we’ve taken a look at what would be the issue with being more fully transparent, and we think we can keep all the value and make it available to more investors.”

“Like the existing Inflation-Protected Securities Fund, which Volpert co-manages, the ETF would invest most of its assets in Treasury Inflation-Protected Securities. While the fund uses the Barclays Capital U.S. Treasury Inflation Protected Securities Index as a benchmark, its average maturity and mix of bonds may differ from those in the index,” Maxey Reports.

“We’re trying to do a lot of little things that add value,” said Volpert. “We have a huge tailwind expense-ratio advantage, so we start the year with a big advantage, and if we can then add a bit of incremental value by doing a lot of different strategies, it makes the fund very compelling.”

“With some speculating that the Federal Reserve may raise interest rates next year, many investors are seeking to build some inflation protection into their portfolios. “There’s a lot of concern on the part of investors that a lot of this stimulus will create inflation down the road, and they want to be protected,” said Volpert,” Maxey Reports.

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