Vanguard has filed a registration statement for six new factor-based ETFs and one factor-based mutual fund, representing the firm’s first introduction of actively managed ETFs in the US.
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,” says 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 Vanguard US Minimum Volatility ETF seeks to provide long-term capital appreciation with lower volatility relative to the broad US equity market.
The Vanguard US Value Factor ETF seeks to provide long-term capital appreciation by investing in stocks with relatively lower share prices relative to fundamental values.
The Vanguard US Momentum Factor ETF seeks to provide long-term capital appreciation by investing in stocks with strong recent performance.
The Vanguard US Liquidity Factor ETF seeks to provide long-term capital appreciation by investing in stocks with lower measures of trading liquidity.
The Vanguard US Quality Factor ETF seeks to provide long-term capital appreciation by investing in stocks with strong fundamentals.
The Vanguard US 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.
The five single factor-based ETFs will have an estimated expense ratio of 0.13 per cent; the Multifactor ETF and Multifactor Fund will have an estimated expense ratio of 0.18 per cent. The Multifactor Fund will require a minimum initial investment of USD50,000 for Admiral Shares.