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Vanguard launches Total Corporate Bond ETF


Vanguard has launched the Vanguard Total Corporate Bond ETF (VTC), expanding its US fixed income fund roster to 17 ETFs and 51 indexed and actively managed mutual funds.

The fund offers investors low-cost exposure to the broad US investment-grade corporate bond market through a single fund.
“The Total Corporate Bond ETF provides investors with a core portfolio building block and is a welcome addition to Vanguard’s diversified lineup of low-cost bond ETFs,” says John Hollyer, global head of Vanguard Fixed Income Group.
The new fund seeks to track the Bloomberg Barclays US Corporate Bond Index and trades on the NASDAQ stock exchange with an expense ratio of 0.07 per cent. It is structured as an ETF of ETFs, investing directly in Vanguard’s three existing, low-cost corporate bond ETFs: Vanguard Short-Term Corporate Bond ETF (VCSH), Vanguard Intermediate-Term Corporate Bond ETF (VCIT), and Vanguard Long-Term Corporate Bond ETF (VCLT).
The ETF of ETFs structure enables the fund to immediately access more than 5,500 US corporate bonds by taking advantage of the existing exposure and scale offered by the underlying ETFs. This approach achieves near complete replication of the benchmark at the fund’s inception as well as tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark’s constituents.
Low costs are a critical component to long-term investment success. Vanguard continues to be the industry’s across-the-board cost leader: 99 per cent of Vanguard’s US-domiciled mutual funds fall within the industry’s lowest cost decile and 99 per cent of Vanguard’s US-domiciled ETFs fall within the lowest cost quartile of all ETFs.
While the expense ratio is a meaningful metric in the ETF evaluation process, Vanguard encourages investors to examine other factors.
“As mutual fund and ETF costs continue to compress, the relative benefit to choosing the cheapest fund diminishes,” says Rich Powers, Vanguard Head of ETF Product Management. “When choosing among similarly priced funds, we suggest investors consider elements beyond the expense ratio, such as investment strategy, methodology, tracking difference, spreads, tax efficiency, and brand.”

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