What’s The Next ETF Step For Vanguard?

May 31, 2017

Todd Rosenbluth is director of ETF and mutual fund research at CFRA.

When an elephant prepares to take steps in the jungle, the other animals should take notice. Such an analogy is appropriate with Vanguard and the ETF market.

The average Vanguard ETF product has $10 billion in assets under management, and the firm gathered $50 billion in assets through the first four months of 2017, second only to industry heavyweight iShares' $78 billion, according to FactSet data.

Unlike some ETF providers, Vanguard has been more prudent in expanding its product lineup, with just three new offerings since the beginning of 2014, and 70 in total. Yet in late May, Vanguard updated its regulatory filings to potentially launch transparent, actively managed ETFs. We at CFRA see this as the firm providing additional insight to regulators ahead of hopeful approval.

Given the firm's success in managing active strategies and its ability to retain and grow assets despite competitive pressure from passive products, CFRA thinks Vanguard will have continued success with such future iterations. However, our crystal ball on possible timing is much cloudier.

 

Source: CFRA’s MarketScope Advisor, May 26, 2017

 

Opaque Daily Holdings

The Vanguard Total Stock Market ETF (VTI) and the Vanguard S&P 500 ETF (VOO) have $79 billion and $69 billion in assets, respectively, and are among the five-largest products, based on assets.

Yet unlike the SPDR S&P 500 ETF Trust (SPY), the iShares Core S&P 500 ETF (IVV) and the iShares MSCI EAFE (EFA)—three of the top five ETFs by assets—Vanguard does not provide daily transparency of its holdings because the ETFs are share classes of a portfolio that includes mutual funds.

For example, on Vanguard's website, VOO's information technology weighting was 22.5% as of April 2017, while iShares’ IVV has 23.1% as of May 26, despite tracking the same index.
 

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