Vanguard Finally Introduces Its Municipal Bond ETF

In an average year, roughly 200 hundred new exchange traded products come to market, but few new ETFs come courtesy of Vanguard, the second-largest U.S. ETF issuer behind BlackRock's BLK iShares.

 

Count today as an exception because Vanguard did launch a new ETF, its first municipal bond index fund, the Vanguard Tax-Exempt Bond Index Fund VTEB. Better late than never and that is said because when news broke earlier this year that Vanguard would introduce a municipal bond ETF, the fund was expected to launch in the second quarter

 

The Vanguard Tax-Exempt Bond Index Fund is also available to investors that prefer the mutual fund structure via Vanguard's Investor and Admiral share classes under the tickers “VTEBX” and “VTEAX.” The Investor share class of the new municipal bond fund charges 0.2 percent per year, or $20 per $10,000 invested, and requires a $3,000 minimum investment, according to Vanguard

 

The Admiral share class has an annual fee of 0.12 percent, but requires a $10,000 minimum investment. VTEB, the ETF, also charges just 0.12 percent per year and does not require a minimum investment. VTEB's annual expense ratio of 0.12 percent makes it less expensive than 86 percent of competing tax-exempt municipal bond funds on the market, according to issuer data

 

VTEB's “target benchmark is the S&P National AMT-Free Municipal Bond Index. It seeks to offer diversified exposure to the national municipal bond market, representing bonds with maturities across the yield curve and an effective duration between 5-8 years. The index reflects a higher-quality, investment-grade universe that focuses on the more liquid portion of the market,” according to a statement issued by Vanguard.

 

Pennsylvania-based Vanguard is already one of the dominant issuers of fixed income ETFs. Prior to the debut of VTEB, Vanguard had 16 bond ETFs with more than $75 billion in assets.

 

“Vanguard has a team of approximately 40 municipal bond investment professionals, including portfolio managers, senior credit research analysts, research associates and traders. The firm has a 15-person credit research team that performs detailed analysis on individual credits and collaborates closely with our portfolio managers and traders,” according to the statement.

 

VTEB is the first new ETF introduced by Vanguard in over two years.

Posted In: Long IdeasNewsBondsSpecialty ETFsNew ETFsIntraday UpdateMarketsTrading IdeasETFs
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