Among the new offerings are ETF shares of Vanguard’s flagship Vanguard 500 Index Fund, the industry’s first index mutual fund for individual investors and currently the industry’s second-largest index mutual fund, with $86.8 billion in net assets (source: Lipper, Inc.). Vanguard S&P 500 ETF (NYSE:VOO) features an expense ratio of 0.06%, which is the lowest expense ratio for an ETF based on the S&P 500 Index (source: Morningstar, Inc.).
In addition to Vanguard S&P 500 ETF, Vanguard’s ETF family will expand to 55 offerings with the introduction of eight new equity funds and ETFs targeting the growth and value segments of the S&P 500 Index and the growth, value, and blend segments of the S&P MidCap 400 and SmallCap 600 Indexes.
“The new Vanguard index funds and ETFs offer our trademark low costs and tax efficiency, and aim for the utmost tracking precision. They will appeal to financial advisors and institutional investors seeking to build portfolios based on S&P benchmarks. In particular, the new ETFs will offer additional choices to investors and help Vanguard continue to build momentum in the ETF marketplace,” said Vanguard Chairman and CEO Bill McNabb.
Vanguard’s $23 billion in ETF net cash flow through August led the industry. Cash flow into Vanguard’s equity ETFs has been particularly strong, accounting for 74% of Vanguard’s total ETF cash flow and 51% of the industry’s equity ETF positive cash flow (source: Bloomberg). Vanguard’s ETF assets under management have jumped 60% since August 2009, rising from $71 billion to $113 billion.
Vanguard Tracking Precision Cited
Along with expense ratios that are among the lowest in their respective categories, Vanguard index funds have a long history of tightly tracking their benchmarks. Morningstar recently analyzed five years of weekly returns* for index mutual funds and ETFs that track the S&P 500 Index and found that two Vanguard index funds had the lowest tracking error.
|Vanguard Institutional Index Fund Instl (VINIX)||0.03||0.05||3||1||0.05||5,000,000|
|Vanguard 500 Index Fund Inv (VFINX)||-0.08||0.05||16||2||0.18||3,000|
|Fidelity Spartan 500 Index Inv (FUSEX)||-0.04||0.09||7||4||0.10||100,000|
|Hartford Index HLS IA (HIAIX)||-0.27||0.09||41||5||0.35||—|
|DWS Equity 500 Index Instl (BTIIX)||-0.06||0.09||13||6||0.15||1,000,000|
|iShares S&P 500 Index Fund (IVV)||-0.04||0.07||8||3||0.09||—|
|SPDR S&P 500 (SPY)||-0.06||0.14||15||13||0.09||—|
|Source: Morningstar, Inc.||* Based on the five-year period from 7/10/2005 through 7/10/2010|
Vanguard: A Trusted ETF Provider
Vanguard ETFs are increasingly popular with financial advisors. A new Cogent Research report ranked Vanguard first among ETF providers in advisor loyalty. Vanguard achieved a Net Promoter® Score of 33% compared to the 20% score of the nearest competitor. The report also found that Vanguard outperformed all other major ETF providers in nine of ten critical areas of client experience and service. The 2010 Advisor Brandscape™ report is based on a nationally representative survey of 1,560 investment advisors.
New Products in the Pipeline
In the coming months, Vanguard plans to introduce 11 additional index funds with ETF Shares. On the equity side, Vanguard will add a suite of seven funds with ETF Shares to offer exposure to value, growth, and blend segments of the U.S. stock market based on the large-cap Russell 1000 Index series and the small-cap Russell 2000 Index series. A broad market fund and ETF seeking to track the Russell 3000 Index will also be offered.
On the bond side, Vanguard will offer three new municipal bond index funds with traditional and exchange-traded shares, tracking benchmarks in the S&P National AMT-Free Municipal Bond Index series. The expense ratio for Vanguard’s new municipal ETFs is estimated to be 0.12%.
Vanguard has also filed for a new real estate fund, which will be benchmarked to the S&P Global ex-U.S. Property Index. Vanguard Global ex-U.S. Real Estate Index Fund will offer Investor Shares, Institutional Shares, Signal Shares, and ETF Shares.
After the introduction of these planned products, Vanguard will offer 66 ETFs, including suites of domestic stock ETFs based on benchmarks from MSCI, S&P, and Russell.
Vanguard pioneered index investing for individuals in 1976 with the launch of the Vanguard 500 Index Fund. The company launched its first ETF in 2001—Vanguard Total Stock Market ETF (ticker: VTI), which is now one of the largest ETFs in the market, with $13.6 billion in net assets. Vanguard manages $713 billion in aggregate index fund assets.
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages nearly $1.4 trillion in U.S. mutual fund assets. Vanguard offers more than 160 funds to U.S. investors and more than 50 additional funds in non-U.S. markets.
There are other material differences between funds that must be considered prior to investing.
All mutual funds and ETFs are subject to market risk, which may result in the loss of principal. Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks. Foreign investing involves additional risks including currency fluctuations and political uncertainty. Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility. Investments in bond funds are subject to interest rate, credit, and inflation risk. Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund’s trading or through your own redemption of shares. For some investors, a portion of the fund’s income may be subject to state and local taxes, as well as to the federal Alternative Minimum Tax.
Vanguard ETFs are not redeemable with an Applicant Fund other than in Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor will incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
A registration statement relating to the Vanguard ETF shares has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
Copies of the final Vanguard ETF prospectuses, when available, as well as prospectuses for all other Vanguard funds can be obtained by visiting www.vanguard.com, or by calling 800-662-7447. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing. Please note that a preliminary prospectus is subject to change.
Standard & Poor’s® and S&P®, S&P 500®, Standard & Poor’s 500, 500®, S&P MidCap 400®, and S&P SmallCap 600® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and have been licensed for use by The Vanguard Group, Inc. The Vanguard mutual funds are not sponsored, endorsed, sold, or promoted by S&P or its Affiliates, and S&P and its Affiliates make no representation, warranty, or condition regarding the advisability of buying, selling, or holding units/shares in the funds.
The Russell 1000 Index, Russell 2000 Index, Russell 3000 Index and Russell® are registered trademarks of Russell Investments and have been licensed for use by The Vanguard Group, Inc. The Product(s) are not sponsored, endorsed, sold or promoted by Russell Investments and Russell Investments makes no representation regarding the advisability of investing in the Products.
U.S. Pat. No. 6,879,964 B2; 7,337,138.
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All asset figures are as of August 31, 2010, unless otherwise noted.
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