VALLEY FORGE, PA (JANUARY 6, 2015)— Vanguard today filed a registration statement with the U.S. Securities and Exchange Commission to offer a national municipal bond index fund with an exchange-traded fund (ETF) share class. Vanguard Tax-Exempt Bond Index Fund will be the firm’s first tax-exempt index fund and ETF. Vanguard is one of the largest managers of municipal bond funds in the industry—with about $140 billion in tax-exempt bond and money market funds—and one of the largest ETF providers, with $422.6 billion in assets.
Vanguard Tax-Exempt Bond Index Fund’s target benchmark is the S&P® National AMT-Free Municipal Bond Index. The fund will offer investors exposure to investment-grade municipal bonds across the entire yield curve. The fund is intended to provide a sustainable level of current income that is exempt from federal personal income taxes.
“For investors in high tax brackets, a high-quality, broadly diversified municipal bond fund or ETF can provide tax advantages as well as diversification from the risks of the equity market,” said Vanguard CEO Bill McNabb. “Vanguard is pleased to bring a low-cost index option to the municipal category as a complement to our lineup of low-cost actively managed tax-exempt bond funds.”
The fund, which is expected to be available in the second quarter of 2015, will offer three share classes: Investor Shares, Admiral Shares, and ETF Shares (with estimated expenses ratio of 0.20%, 0.12%, and 0.12%, respectively). The municipal bond funds in Lipper’s General and Insured Municipal Debt Funds category have an average expense ratio of 0.97%; comparable ETFs in the category have an average expense ratio of 0.49% (source: Lipper, a Thomson Reuters Company, December 31, 2013).
Investor Shares will require a minimum initial investment of $3,000 and Admiral Shares will require a minimum initial investment of $10,000. These share classes will also include a 0.50% purchase fee to defray portfolio transaction costs and enable the fund to more closely track its benchmark.
A municipal bond funds pioneer
Vanguard Fixed Income Group is one of the world’s largest fixed income managers, overseeing more than $800 billion, of which $140 billion is invested in tax-exempt bond and money market funds. Vanguard offers 12 actively managed municipal bond funds (five national, seven state-specific) and six tax-exempt money market funds (one national, five state-specific).
Vanguard offered its first three tax-exempt bond funds (short-, intermediate-, and long-term) in 1977. It was the first mutual fund company to offer shareholders a choice among municipal bond funds of differing durations.
Adam Ferguson, a portfolio manager in Vanguard Fixed Income Group, will manage the new fund. Mr. Ferguson joined Vanguard in 2004 and currently manages multiple municipal bond funds.
Vanguard has an experienced municipal team of approximately 40 professionals, including portfolio managers, senior credit research analysts, research associates, and traders. The team’s approach, whether managing money market funds, bond index funds, or actively managed bond funds, is to invest shareholders’ money in a disciplined, risk-controlled manner.
A leader in ETFs
Vanguard offers 67 low-cost ETFs in the U.S., including 15 bond ETFs. Cash flow continues to be strong, with investors entrusting $63.5 billion to our ETFs year-to-date through November 2014 (and $55 billion in calendar year 2013).
Headquartered in Valley Forge, Pennsylvania, Vanguard is one of the world’s largest investment management companies. It manages more than $2.85 trillion in U.S. mutual fund assets, including more than $422.6 billion in ETF assets. The firm offers more than 160 funds to U.S. investors and more than 120 additional funds in non-U.S. markets. For more information, visit vanguard.com.
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All asset figures are as of November 30, 2014, unless otherwise noted.
For more information about Vanguard funds, visit vanguard.com or call 800-662-7447 to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.
S&P® and S&P® National AMT-Free Municipal Bond Index are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Vanguard. The S&P National AMT-Free Municipal Bond Index is a product of S&P Dow Jones Indices LLC and has been licensed for use by Vanguard. The Vanguard Tax-Exempt Bond Index Fund is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective affiliates, and none of S&P Dow Jones Indices LLC, Dow Jones, S&P nor their respective affiliates makes any representation regarding the advisability of investing in such product(s)
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.
All investments are subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bond funds are subject to interest rate, credit, and inflation risk. Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund's trading or through your own redemption of shares. For some investors, a portion of the fund's income may be subject to state and local taxes, as well as to the federal Alternative Minimum Tax.
A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.
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