ETF Watch: More Vanguard ETFs See Fees Reduced

Vanguard has announced another wave of expense ratio reductions affecting 68 share classes. This is the third round of expense ratio reductions Vanguard has announced in just three months. In total, 124 different fund shares have been affected, with $143 million in savings racked up for Vanguard’s investors, the investment management company said.

Twelve Vanguard ETFs were included in this latest series of cost adjustments, according to the press release:

• Vanguard FTSE Emerging Markets ETF (VWO) declined one basis point to 0.14%.
• Vanguard FTSE Europe ETF (VGK) declined two basis points to 0.10%.
• Vanguard FTSE Pacific ETF (VPL) declined two basis points to 0.10%.
• Vanguard Total International Stock ETF (VXUS) declined two basis points to 0.11%.
• Vanguard FTSE All-World ex-US Index Fund (VEU) declined two basis points to 0.11%.
• Vanguard Total World Stock ETF (VT) declined three basis points to 0.11%.
• Vanguard Global ex-U.S. Real Estate ETF (VNQI) declined three basis points to 0.15%.
• Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) declined four basis points to 0.13%.
• Vanguard Emerging Markets Government Bond ETF (VWOB) declined two basis points to 0.32%.
• Vanguard Tax-Exempt Bond Index ETF (VTEB) declined three basis points to 0.09%.
• Vanguard Total International Bond ETF (BNDX) declined three basis points to 0.12%.
• Vanguard High Dividend Yield Index Fund (VYM) declined one basis point to 0.08%.

All of the ETFs are international funds except for VYM.

“While Vanguard is lowering—and will continue to lower—the cost of investing, the so-called fee war is essentially over on the beta battleground. Investors have won,” said Vanguard CEO Bill McNabb.

“The new fronts in the fee war are active management and advice. Again, investors will ultimately win,” he added.

The Vanguard International High Dividend Yield Index ETF (VYMI) was in one of three share classes—but the only ETF—to see an increase in expense ratio. Its fee has risen 2 basis points to 0.32%.

Direxion Plans ‘Relative Performance’ Funds

A recent filing from Direxion outlines the firm’s plans for 20 different ETFs that provide exposure to a variety of strategies. The document covers eight ETFs that use the relative performance approach as well as another eight funds that track the same indexes but offer 200% leveraged exposure. The filing also includes another four ETFs tracking assorted indexes.

Relative Performance Funds

The Direxion Daily Value/Growth Relative Performance ETF tracks an index that measures the performance of the Russell 1000 Value Index relative to the Russell 1000 Growth Index, essentially representing a long position in the former and a short position in the latter. The index is reset on a daily basis. The fund comes with an expense ratio of 0.75%.

Meanwhile, the Direxion Daily Value/Growth Relative Performance 2X ETF offers two times the performance of the same underlying long/short index on a daily basis and charges an expense ratio of 1.05%. In all, there are seven more pairs of similar funds included in the filing. The ETFs and their expense ratios are as follows:

• Direxion Daily Growth/Value Relative Performance ETF, 0.75%
• Direxion Daily Growth/Value Relative Performance 2X ETF, 1.05%
• Direxion Daily Small/Large Cap Relative Performance ETF, 0.75%
• Direxion Daily Small/Large Cap Relative Performance 2X ETF, 1.05%
• Direxion Daily Large/Small Cap Relative Performance ETF, 0.74%
• Direxion Daily Large/Small Cap Relative Performance 2X ETF, 1.04%
• Direxion Daily Emerging/Developed Relative Performance ETF, 0.88%
• Direxion Daily Emerging/Developed Relative Performance 2X ETF, 1.18%
• Direxion Daily Developed/Emerging Relative Performance ETF, 0.78%
• Direxion Daily Developed/Emerging Relative Performance 2X ETF, 1.08%
• Direxion Daily Defensive/Cyclicals Relative Performance ETF, 0.70%
• Direxion Daily Defensive/Cyclicals Relative Performance 2X ETF, 1.00%
• Direxion Daily Cyclicals/Defensive Relative Performance ETF, 0.70%
• Direxion Daily Cyclicals/Defensive Relative Performance 2X ETF, 1.00%

Assorted ETFs
The four remaining ETFs in the filing are designed to cover a variety of strategies, three of which are constructed on volatility and beta data.

The Direxion State Street GX Dynamic Moderate Allocation ETF will allocate between equities as represented by the S&P 500 and fixed income as represented by the S&P US Aggregate Bond Index based on the signals provided by an absorption ratio. Given a neutral signal, the fund will invest in 60% equities and 40% fixed income, but when it is low, the fund will switch into 100% equities. When the absorption ratio is high, the fund will fully invest in fixed income. The fund carries an expense ratio of 0.44%.

The Direxion Tactical Low Vol ETF tracks the Indxx High Beta Low Volatility Index, which takes a dynamic approach to managing risk exposure. The index covers U.S. equities, including REITs and MLPs, that have at least $5 billion in market capitalization and meet certain liquidity requirements. The index shifts between high-beta and low-beta securities based on the CBOE Volatility Index (VIX) and the moving average of the S&P 500. When volatility is low, it targets high-beta securities. The fund is set to come with an expense ratio of 0.42%.

The Direxion S&P 500 Low Volatility Target Beta ETF is described in the prospectus as being “very different from most other exchange-traded funds.” The fund is designed as a leveraged short-term investment and will offer leveraged exposure to the S&P 500 Low Volatility Beta Rebalanced Index, possibly differing from the return of the index by up to 150%. The prospectus also notes that when volatility is high, it could have more of an effect on the fund’s movements than the actual underlying index. The fund will come with an expense ratio of 0.57%.

Finally, the Direxion Enhanced Dividend Target Beta ETF is similar to the previous fund—and comes with similar warnings—but its underlying index is the Indxx Dominant Dividend U.S. Consistency Index. It has an expected expense ratio of 0.60%.

The funds are slated to list on the NYSE Arca exchange.

Contact Heather Bell at [email protected].