Vanguard Expands Its Low-Cost Cash-Management ETF Lineup
VGUS and VBIL fill a gap in Vanguard's ETF lineup, offering exposure to US Treasury securities with short durations and low volatility.
The Vanguard Group launched two cash-management ETFs Tuesday that will give investors and financial advisors alternatives to traditional money market mutual funds, particularly for allocating idle cash.
The Vanguard Ultra-Short Treasury ETF (VGUS) and the Vanguard 0-3 Month Treasury Bill ETF (VBIL) are described by the Malvern, Pennsylvania-based asset manager as “part of investors’ liquidity toolkit.”
The new exchange-traded funds offer exposure to US Treasury securities with short durations and low volatility, and are expected to maintain tight bid-ask trading spreads.
VGUS tracks the Bloomberg Short Treasury Index, which includes US Treasury Bills, Notes, and Bonds with less than 12 months until maturity. VBIL tracks the Bloomberg US Treasury Bills 0-3 Months Index.
The expense ratio for both ETFs is 0.07%, making them the lowest-cost ETFs in their respective categories, according to Vanguard.
Vanguard Competes for Cash
Both VGUS and VBIL fill a gap in the Vanguard lineup, but the new ETFs will be competing with existing cash-management funds.
For example, some of the comparable ETFs include the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), the iShares 0-3 Month Treasury Bond ETF (SGOV), the US Treasury 3 Month Bill ETF (TBIL) and the WisdomTree Floating Rate Treasury ETF (USFR).
“This follows Vanguard’s playbook of being late to the game but aiming to win through lower costs,” said Jeff DeMaso, editor of the Independent Vanguard Adviser newsletter. “While it’s not groundbreaking, VBIL is a nice addition to Vanguard’s stable because it offers an alternative to Vanguard’s money market funds, not that there’s anything wrong with Vanguard’s money market funds,”
The non-Vanguard ETFs listed above all charge between 9 and 15 basis points, proving that the Vanguard continues to flex its muscle when it comes to fee pressure.
Vanguard manages more than $2.6 trillion across 86 ETFs that have an average expense ratio of 9 basis points.
Vanguard might be competing with some money market funds wrapped inside ETFs as it eyes the nearly $7 trillion worth of money sitting in various forms of cash accounts.
Last week, BlackRock Inc. (BLK) came to market with the iShares Prime Money Market ETF (PMMF) and the iShares Government Money Market ETF (GMMF), which offer all the structure and benefits of traditional money market mutual funds with the added liquidity of ETFs.
The new iShares ETFs followed the September launch of the Texas Capital Government Money Market ETF (MMKT), which was the first ETF wrapped around the money market structure.
