Vanguard Launches Russell-Based ETFs

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September 22, 2010
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The low-cost fund company continues its rollouts aimed at catering to advisers with different indexing tastes.

Vanguard, the
Valley Forge, Pa.-based sponsor known for its low-cost ETFs, today launched seven new funds based on Russell indexes. The new funds represent the latest step in an ambitious expansion plan the third-biggest U.S. ETF company announced earlier this year.

Today’s rollout follows by about two weeks the launch of the Vanguard S&P 500 ETF (NYSEArca: VOO) and eight other equity ETFs based on S&P indexes. The company’s plans are aimed at having a broad lineup of Vanguard products that give different advisers who favor different indexes the tools they need.

In keeping with Vanguard’s aggressive stance on expenses, the new funds carry annual expense ratios ranging from 0.12 percent to 0.20 percent; in other words, priced to undercut its main competitor, iShares.

Rick Genoni, the head of ETF product management at Vanguard, said in a telephone interview today that his firm’s expansion into the heart of the ETF marketplace is designed to provide uniformity for investors building long-term allocations.

“If you’re using Russell products to gain exposure to the
U.S.
equity market, then use Russell-based products uniformly,” said Genoni. “You can use a product, like an S&P product, over an allocation built on MSCI indexes for tactical purposes. But when you’re building a long-term allocation, use the same underlying benchmarks.”

Genoni argued that mixing benchmarks in a single portfolio can result in unintended consequences for investors.

“That can create issues—either underlap or overlap in the markets. It’s critically important to align the underlying benchmarks.”

The new Russell-based funds, their tickers and their annual expense ratios are:

  • Vanguard Russell 1000 ETF (NasdaqGM: VONE), 0.12 percent
  • Vanguard Russell 1000 Value ETF (NasdaqGM: VONV), 0.15 percent
  • Vanguard Russell 1000 Growth ETF (NasdaqGM: VONG), 0.15 percent
  • Vanguard Russell 2000 Index Fund (NasdaqGM: VTWO), 0.15 percent
  • Vanguard Russell 2000 Value Index Fund (NasdaqGM: VTWV), 0.20 percent
  • Vanguard Russell 2000 Growth Index Fund (NasdaqGM: VTWG), 0.20 percent
  • Vanguard Russell 3000 Index Fund (NasdaqGM: VTHR), 0.15 percent

 

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