Vanguard Cuts Ratios 9% On 3 Bond ETFs

April 29, 2013

Asset growth leads Vanguard to drop expense ratios on three fixed-income ETFs.

Vanguard, the third-largest U.S. ETF provider by assets, reported lower expense ratios effective today on three of its bond funds, including the Vanguard Short-Term Bond ETF (NYSEArca: BSV)—a strategy that is now a $28.5 billion fund.

BSV, as well as the Vanguard Long Term Bond ETF (NYSEArca: BLV) and the Vanguard Intermediate Term Bond ETF (NYSEArca: BIV), are each now 9 percent cheaper to own, with expense ratios now pegged at 0.10 percent, down from 0.11 percent previously.

The lower ratios are a direct result of asset growth, as the funds continue to benefit from investor appetite for fixed-income exposure, particularly on the short end of the yield curve.

BSV attracted a net of $1.80 billion in 2012, and has gone on to gather $2.69 billion year-to-date. The fund, which tracks the Barclays U.S. 1-5 Year Government/Credit Float Adjusted Index, serves up exposure to short-term investment-grade U.S. debt, and was launched in 2007.

Intermediate-debt-focused BIV, too, has seen strong investor demand, with net asset inflows reaching $1.54 billion in 2012, and a net of $1.84 billion so far this year. The fund now boasts $17.1 billion in total assets.

BLV attracted a net of $279 million last year and has seen negligible net outflows in 2013, according to data compiled by IndexUniverse. The relatively slower demand for the $5.79 billion fund reflects investor concern about longer-dated debt in the context fact of likely higher interest rates.

“Costs always matter in investing, but are even more important for bond funds in a low-return environment,” Vanguard said in note to advisors.

“Vanguard has benefited from strong financial markets and the continued commitment to our funds and ETFs by our loyal clients, which has allowed us to continue to lower expense ratios,” it added. “If the markets remain strong and clients continue to invest at Vanguard, our funds’ shareholders could continue to see reductions in expense ratios.”


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