It is not a stretch to say that when many investors think of Vanguard, the first two thoughts that pop into their minds are passive management and low fees. Whether it is index funds or exchange-traded funds (ETFs), Vanguard is widely viewed as a low-cost leader, a label the fund giant is not shy about embracing.
While Vanguard is widely viewed as the leader of the index fund revolution and today is the second-largest U.S. ETF issuer, the Pennsylvania-based asset manager does have some roots in active management as well. When acknowledging that active management is part of Vanguard’s DNA, it is not altogether surprising that the company introduced six actively managed ETFs in February.
Nor is it surprising that the new additions to Vanguard’s ETF stable are inexpensive. Not just inexpensive compared to other actively managed ETFs, inexpensive relative to a slew of competing passively manged index funds and ETFs, too.
With that in mind, let’s have a look at Vanguard’s six newest ETFs, five of which charge just 0.13% per year, or $13 on a $10,000 investment.
Vanguard ETFs to Watch: Vanguard U.S. Minimum Volatility ETF (VFMV)
Expense Ratio: 0.13%, or $13 annually per $10,000 invested
The Vanguard U.S. Minimum Volatility ETF (BATS:VFMV) enters a crowded field of low volatility ETFs, most of which are passively managed. VFMV looks to “provide long-term capital appreciation with lower volatility relative to the broad U.S. equity market,” according to Vanguard.
This new Vanguard fund holds 144 stocks with a median market capitalization of $12 billion, just barely into large-cap territory. Traditional low volatility ETFs are often heavily allocated to consumer staples and utilities stocks, but those sectors combine for less than 17% of VFMV’s weight. Rather, this new Vanguard ETF allocates a combined 42.5% of its weight to financial services and consumer discretionary stocks, the latter of which is a mostly unusual sector weight in low volatility funds.
Vanguard ETFs to Watch: Vanguard U.S. Value Factor ETF (VFVA)
Expense Ratio: 0.13%
The idea behind the Vanguard U.S. Value Factor ETF (BATS:VFVA), as is the case with any value strategy, is to invest in stocks with low market valuations relative to what are perceived to be sound fundamentals.
VFVA can draw from the large-, mid- and small-cap spectrums, giving it a median market value of $7.5 billion (mid-cap territory) and a large roster of 785 holdings. Indeed this Vanguard fund lives up to its value billing with a price-to-earnings ratio of just 10.5, or about half the P/E ratio on the S&P 500.
Be careful of sector-level overlap with VFVA and VFMV because the former devotes nearly 46% of its combined lineup to financial services and consumer discretionary names.
Vanguard ETFs to Watch: Vanguard U.S. Momentum Factor ETF (VFMO)
Expense Ratio: 0.13%
The growth and momentum factors have been outpacing value for a while now, indicating that the Vanguard U.S. Momentum Factor ETF (BATS:VFMO) could be one of the new Vanguard ETFs for investors to consider in the near-term.
VFMO “seeks to provide long-term capital appreciation by investing in stocks with strong recent performance,” according to Vanguard.
That could and does mean heaping does of technology and consumer discretionary stocks. Those sectors are staples of passive momentum strategies and VFMO follows suit, devoting almost 40% of its lineup to those sectors.
With VFMO, investors should monitor semiconductor stocks, among other industries, because this new Vanguard fund features Micron Technology, Inc. (NASDAQ:MU), Nvidia Corporation (NASDAQ:NVDA) and Texas Instruments Incorporated (NASDAQ:TXN) among its top 10 holdings.
Vanguard ETFs to Watch: Vanguard U.S. Liquidity Factor ETF (VFLQ)
Expense Ratio: 0.13%
The Vanguard U.S. Liquidity Factor ETF (BATS:VFLQ) looks to generate capital appreciation from stocks with what are deemed as lower liquidity traits. With that qualifier in mind, it may not be surprising that VFLQ’s 905 holdings have a median market value of just $4.5 billion, the lower end of the mid-cap arena.
VFLQ is top-heavy at the sector level with financial services and producer of durable goods combining for nearly 51% of the ETF’s weight.
Although VFLQ tilts toward a lower liquidity profile, its roster is not comprised of no-name stocks. This new ETF’s top 10 holdings include familiar names such as Illinois Tool Works Inc. (NYSE:ITW), Monster Beverage Corp (NASDAQ:MNST) and S&P Global Inc (NYSE:SPGI).
Vanguard ETFs to Watch: Vanguard U.S. Quality Factor ETF (VFQY)
Expense Ratio: 0.13%
The quality factor does not always get attention on par with its growth and value rivals, but over the long-term, quality stocks can be rewarding. Hallmarks of quality stocks include strong fundamentals, such as low debt and leverage, strong return on equity and assets, the ability to grow dividends, profitability and strong earnings quality.
The Vanguard U.S. Quality Factor ETF (BATS:VFQY) holds nearly 720 stocks, a large amount for a dedicated quality, but that is because this Vanguard fund features stocks from each of the three major market cap universes.
Quality stocks can trade with slightly higher valuations than the broader market, but also low volatility over time. Technology, consumer discretionary and financial services names combine for two-thirds of VFQY’s weight. Top 10 holdings include Monster Beverage and Texas Instruments.
Vanguard ETFs to Watch: Vanguard U.S. Multi-Factor ETF (VFMF)
Expense Ratio: 0.18%
Multi-factor funds are a fast-growing segment in the broader ETF space and, as the term implies, put several investment factors together under the umbrella of one fund. That is what the Vanguard U.S. Multi-Factor ETF (BATS:VFMF) aims to do.
This new Vanguard ETF is “looking for stocks with the best combination of value, momentum, and quality characteristics,” according to Morningstar. “The basic idea behind putting these factor strategies together is that although each of these factors on their own have a good long-term record, they each go through extended periods of underperformance.”
VFMF, which is also available as a mutual fund, holds 557 stocks with a median market value of $10.5 billion. Even with the implementation of mid- and small-cap stocks into its portfolio, VFMF trades at a lower price-to-earnings ratio than the S&P 500.
This new Vanguard fund allocates over 42% of its weight to financial services and consumer discretionary stocks. The technology and producer durables combine for almost a third of the VFMF roster.
Todd Shriber does not own any of the aforementioned securities.
