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CNBC
3 days ago
- Business
- CNBC
Index fund giant Vanguard is getting more active in its approach to market
Actively managed exchange-traded funds are having a moment, but it's not going to be a passing fad. This year alone, a record number of ETFs have been introduced, with 288 new funds and the potential for over 1,000 new ETFs by this year's end, many bringing actively managed strategies from the traditional mutual fund world to ETFs. There are currently more than 2,000 active ETFs, and while they only make up about 10% of total ETF market assets, they have taken in over one-third of the flows this year from investors and reached the $1 trillion mark in total assets this year. ETF experts say as more major fund companies add actively managed portfolios, it will help to shape the ETF industry's long-term future. Case in point is the biggest index fund company of all, Vanguard. Vanguard has launched eight active fixed-income ETFs. Roger Hallam, Vanguard global head of rates, cites these strategies in being integral for generating repeatable returns for clients. "We're very focused on delivering bottom-up security selection to ensure that our alpha generation is as high information as it can be, so that we deliver repeatable returns for our investors over the investment cycle" Hallam said on a recent CNBC "ETF Edge" segment. The Vanguard ETFs include an ultra-short treasury ETF (VGUS), a 0-3 month T-Bill ETF (VBIL), a short duration bond ETF (VSDB), and a long-term tax exempt bond ETF (VTEL) amongst others. ETF experts caution that there is a big difference between adding active strategies to add return potential around a portfolio core of index holdings and becoming market timer, with the latter still a mistake too many investors make when markets are volatile. Active fixed income strategies have allowed managers to be more surgical in approach to a bond market which has faced high and atypical levels of volatility, and in light of the fact that the big traditional index from the bond market, the AGG, is considered by many bond experts to be out of date in its composition (the same would not be said of the S&P 500 for stocks). In the equities space, some of the newest active approaches are designed to limit risk in the stock market rather than ratchet risk up. Amid a year which already experienced one huge market drop, it's important for investors to not over-correct based on short-term swings in performance. But active strategies make sense in ETFs, according to BlackRock's U.S. Head of Equity ETFs Jay Jacobs, for reasons that go beyond the recent bond and stock market volatility. "You've seen hundreds of billions of dollars pouring into ETF models that are scalable, repeatable, and cost efficient. And increasingly those models are adding active strategies to introduce new sources of alpha for their clients. So, there's a lot of tailwinds," he said, adding that the tax-efficient nature of buying and selling within ETFs is another benefit contributing to the adoption of active ETFs. "Previously, strategies that maybe were harder to access, or there was investment minimums, or the tax efficiency meant they could only be used by institutions that were tax advantaged, that has largely gone away with active ETFs" Jacobs said. "The world has shifted a lot in the last few years," he added. The ETF experts also say that investors may seek more return generation from active approaches if the last decade of market returns proves to be unrepeatable. The ultra-low interest rate policies from the Federal Reserve which boosted the performance of the stock market in particular are not expected to return, and that has implications for what investor can expect from their core holdings. The shift to more of these active strategies marks not only a significant change in how asset managers are tweaking their ETF portfolio lineups, but in how investors are approaching the market. Disclaimer
Yahoo
06-03-2025
- Business
- Yahoo
Vanguard Plans Two More Muni ETFs as Competition Heats Up
(Bloomberg) -- Vanguard Group Inc. is planning to launch two new municipal-bond exchange-traded fund offerings after tripling its lineup of products catering to state and local-government debt investors last year. Trump Administration Plans to Eliminate Dozens of Housing Offices Republican Mayor Braces for Tariffs: 'We Didn't Budget for This' How Upzoning in Cambridge Broke the YIMBY Mold NYC's Finances Are Sinking With Gauge Falling to 11-Year Low New Jersey College to Merge With State School to Avoid Closure The Vanguard New York Tax-Exempt Bond ETF, which is expected to trade under the ticker MUNY, will focus on investment-grade New York debt. The fund will appeal to residents of the high-tax state of New York who are drawn to the tax-free interest paid by municipalities there. The investing giant also filed to register the Vanguard Long-Term Tax-Exempt Bond ETF, or VTEL, which will provide exposure to longer duration municipal bonds. While muni-tied products make up just $146 billion in assets, a sliver of the more than $10 trillion US ETF market, issuers are competing to offer new products in a bid to draw in investors in an increasingly competitive space. Wall Street money managers launched over two dozen new muni ETFs in 2024, a record. The Malvern, Pennsylvania-based company is vying for leadership in the space with BlackRock Inc. The $36.5 billion Vanguard Tax-Exempt Bond ETF and BlackRock's $40.6 billion iShares National Muni Bond ETF (MUB) dominate market share. Currently, no other muni ETF products have more than $10 billion in assets, but that hasn't stopped other issuers from throwing their hat in the ring. Nuveen launched two actively managed muni ETFs in January. Still, the low-cost, easy-to trade products continue to draw investors. Muni ETFs have seen inflows in each of the past 12 months, including $2.1 billion in February, Bloomberg Intelligence data show. The influx also comes as muni-bond yields stay relatively elevated, making the asset class more attractive compared to years of low interest rates. Vanguard's two new passively-run funds are expected to have an expense ratio of 0.09%, or 90 cents per $1,000 of average net assets. 'MUNY is specifically designed for tax-sensitive residents of New York while VTEL serves investors looking for exposure to longer duration municipal bonds, low fees, tax-efficiency, and trading flexibility,' Vanguard spokesperson Jessica Schifalacqua said in an emailed statement. Snack Makers Are Removing Fake Colors From Processed Foods An All-American Finance Empire Drew Billions—and a Regulator's Attention The Mysterious Billionaire Behind the World's Most Popular Vapes Rich People Are Firing a Cash Cannon at the US Economy—But at What Cost? Greenland Voters Weigh Their Election's Most Important Issue: Trump ©2025 Bloomberg L.P. Sign in to access your portfolio
Bloomberg
06-03-2025
- Business
- Bloomberg
Vanguard Plans Two More Muni ETFs as Competition Heats Up
By Vanguard Group Inc. is launching two new municipal-bond exchange-traded fund offerings after tripling its lineup of products catering to state and local-government debt investors last year. The Vanguard New York Tax-Exempt Bond ETF, which is expect to trade under the ticker MUNY, will focus on investment-grade New York debt. The fund will appeal to residents of the high-tax state of New York who are drawn to the tax-free interest paid by municipalities there. The investing giant also filed to register the Vanguard Long-Term Tax-Exempt Bond ETF, or VTEL, which will provide exposure to longer duration municipal bonds.
