If you’re a fund investor, whether it be mutual funds or exchange-traded funds, chances are your portfolio has at least one Vanguard fund. The Wall Street Journal reported Vanguard raked in a mutual fund industry record $236 billion last year, easily topping the $214.5 billion the firm brought in 2014.
About a third of those new assets went to Vanguard ETFs, making the company the second-largest U.S. ETF issuer behind only BlackRock’s (BLK) iShares unit. By the end of the year, Vanguard ETFs added $76.4 billion in new assets, according to S&P Capital IQ.
Of the 100 largest U.S.-listed ETFs, 22 are Vanguard funds — an impressive number considering that Vanguard’s lineup in terms of total ETFs is small relative to comparably sized competitors.
However, despite what is still a sizable ETF lineup and a massive number of assets under management, some Vanguard funds fly under the radar.
Here are some examples of Vanguard funds that are not grabbing a ton of headlines, but merit closer consideration by investors.
Vanguard Funds to Buy: Vanguard Tax-Exempt Bond ETF (VTEB)
Expense Ratio: 0.12%, or $12 per $10,000 invested
Compared to other ETF issuers, Vanguard does not bring many new funds to market. In fact, the Vanguard Tax-Exempt Bond ETF (VTEB), which debuted in August, was the only new Vanguard ETF to come to market in either of the past two years. That probably explains why among Vanguard funds, VTEB currently leads a somewhat anonymous existence.
VTEB is the first Vanguard ETF offering exposure to municipal bonds, an asset class Vanguard already had a major footprint in via mutual funds. Although this is a new Vanguard ETF, it has established a following as highlighted by its more than $149 million in assets under management as of the end of December. That makes this Vanguard fund one of the most successful ETFs of any stripe to come to market last year.
VTEB features a conservative credit profile, as nearly 98% of its portfolio is rated AAA, AA or A, according to issuer data. Nearly 53% of VTEB’s holdings have maturities of 10 to 20 years or 20 to 30 years.
This Vanguard fund charges 0.12% per year, or $12 for every $10,000 invested, making it less expensive than 87% of rival funds.
Vanguard Funds to Buy: Vanguard Mega Cap ETF (MGC)
Expense Ratio: 0.09%
It’s not that the Vanguard Mega Cap ETF (MGC) is small. With $1.2 billion in assets under management, this Vanguard ETF is hefty in size, but MGC does go overlooked compared to other broad market and large-cap Vanguard ETFs.
This Vanguard ETF follows the CRSP US Mega Cap Index, which gives investors access to about 70% of the total market capitalization of U.S. equities. Over the past three years, MGC has trailed the S&P 500 by 20 basis points, but the Vanguard ETF has also been 20 basis points less volatile the benchmark U.S. equity index.
As a mega-cap ETF, MGC’s sector allocations are not surprising, including an 18% weight to technology stocks. Financials account for another 18% of this Vanguard fund’s weight. Healthcare and consumer discretionary stocks combine for nearly 30% of this Vanguard ETF’s lineup.
MGC’s top 10 holdings, which represent of 21.4% of the ETF’s weight, include Apple (AAPL) and Microsoft (MSFT).
This Vanguard ETF charges 0.09% per year, or $9 for every $10,000 invested. That makes it less expensive than 91% of rival funds.
Vanguard Funds to Buy: Vanguard FTSE Pacific ETF (VPL)
Expense Ratio: 0.12%
There are plenty of Vanguard ETFs that offer exposure to international stocks, but the Vanguard FTSE Pacific ETF (VPL) is one of the more focused regional plays, as this Vanguard ETF focuses exclusively on developed Asia-Pacific equities.
As a market capitalization-weighted fund tracking Asia-Pacific developed markets, it is not surprising that this ETF devotes over 60% of its weight to Japanese stocks. Australia, in turn, commands 16.5% of VPL’s lineup. Investors should also note that the VPL features a 10.7% weight to South Korean stocks because VPL tracks a FTSE index and that index provider classifies Asia’s fourth-largest economy as a developed market.
VPL is up 1.1% over the past three years, a performance that is five times better than the MSCI EAFE Index over the same period. VPL charges 0.12% annually, or $12 per $10,000 invested, making it less expensive than 91% of rival funds.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
