VALLEY FORGE, PA (November 28, 2017)—Vanguard today filed a registration statement for six new factor-based ETFs and one factor-based mutual fund, representing Vanguard’s first introduction of actively managed ETFs in the U.S. The company currently offers suites of active factor ETFs in Canada and the United Kingdom. The new factor funds are expected to begin trading in the first quarter of 2018.
Five single factor funds are designed for financial advisors and institutional investors seeking to achieve specific risk or return objectives through targeted factor exposures: minimum volatility, value, momentum, liquidity, and quality. The sixth ETF and fund will offer a multi-factor approach. Vanguard will employ an active, rules-based quantitative approach in managing the funds, which will also feature the traditional characteristic of all Vanguard funds—low cost.
“Our factor-based fund offerings serve as a valuable extension of our low-cost active lineup, providing additional ways for suitable investors to help meet their long-term objectives by targeting exposure to specific factors in the market,” said Vanguard Chief Investment Officer Greg Davis. “With Vanguard’s actively managed, rules-based approach to factors, investors can now harness well-known factor exposure in a more transparent and low-cost way.”
The new suite of active factor offerings includes:
- Vanguard U.S. Minimum Volatility ETF – seeks to provide long-term capital appreciation with lower volatility relative to the broad U.S. equity market.
- Vanguard U.S. Value Factor ETF – seeks to provide long-term capital appreciation by investing in stocks with relatively lower share prices relative to fundamental values.
- Vanguard U.S. Momentum Factor ETF – seeks to provide long-term capital appreciation by investing in stocks with strong recent performance.
- Vanguard U.S. Liquidity Factor ETF – seeks to provide long-term capital appreciation by investing in stocks with lower measures of trading liquidity.
- Vanguard U.S. Quality Factor ETF – seeks to provide long-term capital appreciation by investing in stocks with strong fundamentals.
- Vanguard U.S. Multifactor ETF – seeks to provide long-term capital appreciation by investing in stocks with relatively strong recent performance, strong fundamentals, and low prices relative to fundamentals.
- Vanguard U.S. Multifactor Fund – seeks to provide long-term capital appreciation by investing in stocks with relatively strong recent performance, strong fundamentals, and low prices relative to fundamentals.
The five single factor-based ETFs will have an estimated expense ratio of 0.13%; the Multifactor ETF and Multifactor Fund will have an estimated expense ratio of 0.18%. The Multifactor Fund will require a minimum initial investment of $50,000 for Admiral Shares.
The risk of factor investing
While factors have exhibited the potential for strong performance, there are a number of risks for investors to consider. Factor returns can be cyclical, and investors should be aware of the potential for periods of underperformance relative to the broad equity market.
Implementing factors in a portfolio
Factor investing can be used in a number of applications, including static tilts, active fund substitution, and portfolio completion. To assist advisors and institutional investors, Vanguard published Equity factor-based investing: A practitioner’s guide, which offers a primer on the suitability and key portfolio construction considerations of factor investing.
Experienced Vanguard equity team to manage funds
Vanguard Quantitative Equity Group (QEG), which has more than 25 years of quantitative investment management experience, will serve as investment advisor to the funds. QEG currently manages nearly $35 billion in assets across more than 35 mandates, including all Vanguard factor funds offered to investors abroad and the firm’s first active U.S. factor mutual fund, Vanguard Global Minimum Volatility Fund, which was launched in December 2013.
Vanguard is one of the world’s largest investment management companies. As of October 31, 2017, Vanguard managed $4.8 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 371 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.
All figures as of October 31, 2017, unless otherwise noted.
A registration statement relating to the fund and ETFs 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.
For more information about Vanguard funds and ETFs, visit advisors.vanguard.com or call 800-662-7447 to obtain a prospectus or, if available, a summary 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.
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 and hold those shares in a brokerage account. 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.
Vanguard Marketing Corporation, Distributor of the Vanguard Funds.
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