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Vanguard to launch Total Corporate Bond ETF


Vanguard has filed a preliminary registration statement with the Securities and Exchange Commission for a new index portfolio, Vanguard Total Corporate Bond ETF.

The ETF is expected to launch in the fourth quarter and will offer investors access to the entire US investment-grade corporate bond market through a single fund.
“The new offering complements our existing lineup of total market funds and will provide investors with low-cost, broadly diversified exposure to the US investment-grade corporate bond market,” says John Hollyer, global head of Vanguard Fixed Income Group.
The fund will be structured as an ETF of ETFs, investing directly in three existing, low-cost ETFs: Vanguard Short-Term Corporate Bond ETF (VCSH), Vanguard Intermediate-Term Corporate Bond ETF (VCIT), and Vanguard Long-Term Corporate Bond ETF (VCLT).
This approach enables the Total Corporate Bond ETF to achieve immediate scale by using existing exposure from the underlying ETFs, and it is expected to result in tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark’s constituents. Vanguard estimates an expense ratio of 0.07% upon the ETF’s launch.
Vanguard, through its Fixed Income Group, will serve as the investment advisor to the ETF. The Fixed Income Group manages more than $350 billion1 of both active and index corporate bond assets. With USD1.2 trillion assets under management, the group is one of the world’s largest bond fund managers and maintains investment operations in Malvern, PA; Scottsdale, AZ; London, England; and Melbourne, Australia.
Vanguard introduced the first bond index fund more than 30 years ago with the launch of Vanguard Total Bond Market Index Fund. The firm launched its first bond ETFs in the US in 2007 and has since expanded its lineup globally.
Vanguard Total Corporate Bond ETF will be the first US-domiciled bond ETF introduced by the firm since the Vanguard Tax-Exempt Bond Index ETF (VTEB), which began trading in August 2015.
“In recent years, we have been building out our ETF lineup to serve growing demand by our clients abroad,” says Greg Davis, Vanguard’s chief investment officer. “Since 2015, we have launched a total of 27 ETFs in Canada, Australia, Hong Kong, Switzerland, and the UK.”

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