Vanguard has launched its first actively managed ETFs on Australian Securities Exchange – the Vanguard Global Value Equity Active ETF (VVLU AU) and Vanguard Global Minimum Volatility Active ETF (VMIN AU).
Vanguard has launched its first two actively managed ETFs on Australian Securities Exchange.
The funds are managed by Vanguard’s Quantitative Equity Group (QEG) and combine rules-based methodologies with an active oversight to provide targeted and consistent factor exposures.
VVLU invests in equity securities globally that possess strong value characteristics. The fund draws its securities from the broad investment universe of the FTSE Developed All Cap Index, which serves as the fund’s benchmark.
Stocks from the universe are divided into regions – the United Kingdom, Europe ex-UK, Japan, Asia Pacific ex-Japan, Canada and the United States. The United States is further divided into three size groups (large-, mid-, and small-caps), resulting in a total of eight groups.
In each group, stocks are evaluated and ranked based on three measures of value: price-to-book ratio, forward-earnings-to-price ratio and cashflow-to-price ratio. Those stocks with the strongest value characteristics within each group are selected for the portfolio.
VMIN selects stocks from, and seeks to outperform, the FTSE Global All-Cap Index.
The fund invests in stocks from developed and emerging markets which display a combination of factors that can result in lower portfolio volatility. VMIN selects and weights these stocks in order to mimic a “global minimum volatility portfolio”. Additional risk controls are then employed to ensure the portfolio is sufficiently diversified and liquid.
Michael Roach, Australian head of QEG, commented, “Factors are the DNA of an investment portfolio, the underlying characteristics that drive investment performance. Vanguard is taking a different approach to other factor fund offerings in the market—we are actively managing these portfolios, weighting shares according to their exposure to each factor whilst maintaining a broadly diversified investment portfolio.
“A major benefit of using active versus index management for factor implementation in these portfolios is that we reduce factor drift in the portfolio—rebalancing as needed rather than being tied to the index rebalancing date.
Each fund has an expense ratio of 0.28%, which is on the cheaper end of the scale for actively managed ETFs.
Daniel Reyes, Vanguard’s Asia-pacific head of investments, said, “Offering active management at a lower cost removes one of the most persistent barriers to active outperformance. This expansion of our ETF range offers more tools to help investors build well-diversified portfolios—across and within asset classes and investment styles, and according to their appetite for risk.”