Vanguard, the second-largest U.S. issuer of exchange traded funds, is at it again. “It” being lowering fees, something the firm did on a bunch of ETFs just a few months ago.
Last week, Vanguard unveiled fee cuts on four ETFs and three index fund share classes that are related to the equity ETF in that group. The other three ETF fee reductions pertain to fixed income funds.
“In aggregate, these changes represent $12.9 million in savings returned to investors, bringing the total 2019 fiscal year client savings to $85.1 million,” according to the issuer.
Here are the Vanguard ETFs that just got a little bit cheaper.
Vanguard Extended Market ETF (VXF)
The annual fee on the Vanguard Extended Market ETF VXF is now 0.06% per year, or $6 on a $10,000 investment, down from 0.07%.
Often overlooked relative to some other Vanguard equity ETFs, VXF is still a monster with $8.3 billion in assets under management and serves a very useful function: providing investors exposure to a broad basket of domestic mid- and small-cap stocks that are often under-represented or left out of traditional large-cap equity funds.
In other words, VXF's 3,271 holdings are the U.S. stocks on major exchanges not residing in the S&P 500.
Vanguard Intermediate-Term Bond ETF (BIV)
Like the aforementioned VXF, the Vanguard Intermediate-Term Bond ETF BIV earned a fee cut, but of a slightly larger variety as BIV now charging 0.05% per year, down from 0.07%.
The $12.6 billion BIV follows the Bloomberg Barclays U.S. 5–10 Year Government/Credit Float Adjusted Index and holds nearly 1,900 bonds with an average duration of 6.3 years. Massive inflows to bond ETFs over the past year have allowed Vanguard to reduce expenses on many of its fixed income ETFs.
“Driven in part by record fixed income ETF cash flow, Vanguard reported lower expense ratios on 16 of its 18 U.S. bond ETFs over the 2019 fiscal year reporting cycle,” said the issuer.
Vanguard Long-Term Bond Index Fund ETF Shares (BLV)
The Vanguard Long-Term Bond Index Fund ETF Shares BLV also saw its expense ratio reduced to 0.05% per year from 0.07%.
This $4.8 billion ETF holds 2,338 bonds with an average duration of 15.8 years, making it sensitive to changes in interest rates. With its yield of 3.22%, it wouldn't be surprising to see BLV post another strong year of asset gathering in 2020.
Vanguard Short-Term Bond ETF (BSV)
Like the other fixed funds highlighted here, the Vanguard Short-Term Bond ETF BSV is now charging 0.05% annually, down from 0.07%. The $21.9 billion BSV holds almost 2,500 bonds.
“Vanguard's U.S. fixed income ETFs experienced $37.1 billion in cash flow in 2019, a 103% increase from $18.3 billion in 2018,” according to the issuer. “Given the scale of the global bond market and relative small footprint of bond ETFs, Vanguard expects greater fixed income ETF adoption to continue.”
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