Vanguard files for actively managed smart beta ETFs

Nov 30th, 2017 | By | Category: ETF and Index News

Asset management titan Vanguard has filed with the Securities and Exchange Commission (SEC) to launch six new actively managed smart beta ETFs providing exposure to US equities. The firm’s first foray into the US-listed active ETF space will initially include momentum, liquidity, quality, value and low volatility single factor ETFs as well as a multi-factor fund.

Vanguard files for active smart beta ETFs

The new actively managed range will feature five single factor ETFs and a multi-factor ETF.

The prospectus states the range of ETFs will feature US-listed equities from across the size spectrum and will use a quantitative model to build portfolios with the desired factor exposure. The multi-factor ETF will select stocks that achieve high quality, value and momentum scores.

In keeping with Vanguard’s reputation for low fees, the single factor funds will cost just 0.13% and the multi-factor fund will cost 0.18%. As such, the funds are priced more like index-tracking smart beta strategies rather than actively managed funds.

There is one US-listed active ETF that is available at a lower cost than the proposed Vanguard funds – the iShares Ultra Short-Term Bond ETF (ICSH US), which comes with a 0.08% annual charge. However, for investors wanting active exposure to equities, the cheapest ETF currently available in the US is the PowerShares S&P 500 Downside Hedged Portfolio (PHDG US), which has a significantly higher annual charge of 0.39%.

Vanguard already offers a number of actively managed single factor ETFs in Europe including funds that offer exposure to the liquidity, minimum volatility, momentum, and value factors within a global context. The largest is the Vanguard Global Value Factor UCITS ETF (VDVA LN), which was launched in December 2015 and has assets under management of $85 million with a total expense ratio of 0.22%.

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