ETF Watch: Vanguard’s 'VTEB' Now A $1B Fund

The newer muni strategy is racing to reach its well-established competition.

The Vanguard Tax-Exempt Bond Index Fund ETF (VTEB) has reached a key milestone: $1 billion in total assets under management less than two years since its launch.

VTEB, tracking a market-weighted index of investment-grade municipal bonds, is a newcomer to a segment led by the likes of the $8 billion iShares National Muni Bond ETF (MUB) and the $2.3 billion SPDR Nuveen Barclays Municipal Bond ETF (TFI). VTEB came to market in late 2015, while MUB and TFI launched back in 2007.

But VTEB isn’t particularly novel in its approach or in the exposure it offers relative to its competitors. It’s a vanilla investment-grade muni fund. Where the fund stands out is in its cost.

Vanguard’s First Passive Muni Fund

Like most Vanguard ETFs, VTEB is cheap. With an expense ratio of only 0.09%, the fund costs about a third of MUB’s price tag—0.25% in ER—and a lot less than TFI, with a 0.23% ER. That’s $9 per $10,000 invested for VTEB versus $25 and $23 for the same investment amount, respectively.

VTEB was Vanguard’s first-ever passive muni fund, and it’s designed around the same S&P benchmark underlying MUB. So far this year, these muni bond ETFs have traded largely in a range, looking to recover some of the ground they lost following the U.S. presidential election last November. 

DIVY Reaches $50 Million

Another ETF that has seen a spike in AUM recently is the Reality Shares Dividend Growth ETF (DIVY). The fund, launched in December 2014, reached $50 million in assets. The total AUM may seem small, but it represents a 40% jump year-to-date, according to the firm.

DIVY is an alternatives ETF designed to offer “stable returns” with low volatility and low correlations. In other words, it’s an absolute-return strategy that works well as a fixed-income alternative offering both portfolio diversification—it’s not correlated to bonds, to stocks or to hedge funds—and safety.

It’s not cheap to own, at 0.91% in expense ratio. But it’s an actively managed approach that looks to capture pure dividend growth.

DIVY is one of four ETFs offered by Reality Shares. You can read more about this company’s approach to ETFs in a recent interview we did with its CEO, Eric Ervin.

Year-to-date, DIVY is up 3.4%, putting one-year total gains at 13.2%. 

Charts courtesy of StockCharts.com

Contact Cinthia Murphy at [email protected]