Vanguard Plans Broad Corporate Bond Fund

Proposed product will be an ETF of ETFs and track the full maturity range of the corporate bond space.
Reviewed by: Staff
Edited by: Staff

Vanguard has made one of its infrequent filings for a brand-new ETF, but this one has a bit of a twist. The Vanguard Total Corporate Bond ETF will seek to track the Bloomberg Barclays U.S. Corporate Bond Index by investing in other Vanguard products that are tied to subsets of that index.

It's slated to come with an expense ratio of just 0.07%, half of the cost of the lowest-priced broad-maturity corporate bond ETF currently trading. That would be the $120 million Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB), which launched in June and charges 0.14%.

The fund’s holdings will primarily consist of shares of the investment-grade Vanguard Short-Term Corporate Bond ETF (VCSH), the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) and the Vanguard Long-Term Corporate Bond ETF (VCLT). VCLT is the smallest of the three funds, with just $2 billion in assets under management, while VCIT has $16.4 billion and VCSH has $20.6 billion.

The fund would also compete directly with the $38.6 billion iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), which covers the full maturity range of the U.S. corporate bond space and has an expense ratio of 0.15%.

Vanguard currently offers 70 ETFs, 16 of which are fixed-income funds. The firm launches ETFs very rarely and very strategically; Vanguard has an average fund size of more than $10 billion. Its most recent launches were in February 2016 when it rolled out a pair of international dividend ETFs

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