AROUND THE WORLD OF ETFs

June 21, 2012

Vanguard Cuts Fees On 13 ETFs
Vanguard slashed expense ratios on 13 of its ETFs in April, including a nearly 17 percent cut in the price of its Vanguard S&P 500 ETF (NYSE Arca: VOO), a 14 percent price cut on its Vanguard Total Stock Market ETF (NYSE Arca: VTI) and a 9 percent price cut on its Vanguard Total Bond Market ETF (NYSE Arca: BND). Many of the fee cuts either made the funds in question cheapest in their respective classes or put them in the running for that position.

The 10 other expense ratio changes, which all became effective April 26, are as follows:

  • Vanguard Extended Market ETF (NYSE Arca: VXF), 0.14 percent from 0.16
  • Vanguard Growth ETF (NYSE Arca: VUG), 0.10 percent from 0.12
  • Vanguard Large-Cap ETF (NYSE Arca: VV), 0.10 percent from 0.12
  • Vanguard Mid-Cap Growth ETF (NYSE Arca: VOT), 0.10 percent from 0.12
  • Vanguard Mid-Cap ETF (NYSE Arca: VO), 0.10 percent from 0.12
  • Vanguard Mid-Cap Value ETF (NYSE Arca: VOE), 0.10 percent from 0.12
  • Vanguard Small-Cap Growth ETF (NYSE Arca: VBK), 0.10 percent from 0.12
  • Vanguard Small-Cap ETF (NYSE Arca: VB), 0.16 percent from 0.17
  • Vanguard Small-Cap Value ETF (NYSE Arca: VBR), 0.21 percent from 0.23
  • Vanguard Value ETF (NYSE Arca: VTV), 0.10 percent from 0.12

Global X Debuts MLP ETF
The Global X MLP ETF (NYSE Arca: MLPA) went live in April, going head-on against the ALPS Alerian MLP ETF (NYSE Arca: AMLP) with a similar portfolio that boasts the lowest price tag in the segment.

MLPA, which tracks a Solactive Index and comprises some 30 MLPs involved in everything from transportation to storage to processing, refining, marketing, and mining of natural resources, costs only 0.45 percent. That compares with a 0.85 percent expense ratio for both AMLP and the segment's largest ETN, the $4 billion JP Morgan Alerian MLP ETN (NYSE Arca: AMJ).

The MLP structure is not taxed as a corporation, a difference that means it tends to pay hefty dividends, an attractive feature in times of ultra-low interest rates. However, MLP ETFs are taxed as corporations, which can result in double taxation.

Van Eck Launches 'Fallen Angel' Bond ETF
Van Eck Global launched in April a high-yield bond ETF focused on corporate bonds that weren't junk debt at the outset, but that were later downgraded.

The Market Vectors Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL) tracks a BofA Merrill Lynch index comprising dollar-denominated junk corporate bonds that were rated investment grade at time of issuance. The fund has a net expense ratio of 0.40 percent, which is capped through Sept. 1, 2013.

ANGL offers exposure to what still is a largely unexplored segment of the corporate bond market, but one that represents as much as 15 percent of the dollar-denominated high-yield bond universe, according to data provided by Van Eck. Many of the issuers have stronger debt profiles than pure high-yield issuers.

ANGL anticipates paying dividends on a monthly basis, while capital gains, if any, should be seen once a year.

Merk Investments Plans Gold Trust
Famed investor Axel Merk plans to add a physical gold ETF to his firm's planned footprint in the ETF industry. The Merk Gold Trust, which will trade on NYSE Arca under the symbol "OUNZ," will hold London "good delivery bars" as well as other gold bars and coins with a minimum purity of 995 parts per 1,000, according to the regulatory filing. Perhaps most exciting to ETF investors is the fact that investors will be able to redeem shares in the fund for actual gold.

The decision to bring a gold ETF to market appears related to the plans for the Merk Hard Currency ETF to the extent that Merk Investments indicated in the ETF's filing that the currency ETF's possible investments in gold were likely to be implemented through exchange-traded products, including ETPs sponsored by Merk itself.

Merk Investments didn't say how much its gold ETF will cost.

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