A press release entitled, "Vanguard Announces Plans to Launch Ultra-Short Bond ETF," tells us that, Vanguard ... filed an initial registration statement with the Securities and Exchange Commission to launch Vanguard Ultra-Short Bond ETF. The actively managed ETF will offer a low-cost, diversified option for investors seeking income and limited price volatility. Vanguard Fixed Income Group will serve as investment advisor to the new ETF, which is expected to launch in the second quarter of 2021." (Note: Welcome to those joining us for this afternoon's Money Fund University ($250), which takes place Jan. 21-22. Crane Data Subscribers and MFU Attendees may visit the "Money Fund University 2021 Download Center" to access conference materials and recordings.)
Kaitlyn Caughlin, head of the Vanguard Portfolio Review Department comments, "We are excited to present investors with a new solution for managing short-term cash needs and to offer our world-class active fixed income expertise through an ETF.... Vanguard's history of competitive active performance is enabled by rigorous fund oversight, access to a diverse roster of active management talent, and our ability to keep costs low."
Vanguard's release continues, "The ETF will invest in a diversified portfolio consisting of high-quality and, to a lesser extent, medium-quality fixed income securities, including investment-grade credit and government bonds. With an expected average duration of approximately one year, the ETF's interest rate risk sits between money market funds and short-term bond funds, offering investors a solution for anticipated cash needs in the range of six to 18 months. It will have an estimated expense ratio of about 0.10%, compared with the average expense ratio for ultra-short-term bond ETFs of 0.22% (source: Morningstar)."
They add, "Vanguard Ultra-Short Bond ETF will be Vanguard's first active bond ETF. Vanguard currently offers the $16.0 billion actively managed Vanguard Ultra-Short-Term Bond Fund, which debuted in 2015. The new ETF will be separate from, but have a similar strategy to, the existing mutual fund and will offer investors and advisors the ability to trade at intraday market prices and invest by buying one share. The ETF will be managed by the same portfolio management team as the mutual fund."
Jeff DeMaso, Editor and Research Director of The Independent Adviser for Vanguard Investors writes, "Competition in the active bond ETF arena just got hotter. Today, Vanguard filed with the SEC to launch its first actively managed bond ETF in the form of Vanguard Ultra-Short Bond ETF."
He explains, "The fund has been Vanguard's answer for investors looking to earn some income in exchange for taking on a little bit of risk in this environment where money market yields are pinned at the near-zero bound. It is a bond fund -- so its price does fluctuate -- but you can think of the fund as the next step out from cash.... And risk has been low. Ultra-Short-Term Bond's worst decline was a 1.2% drop this past March. (Again, it is a bond fund, not a money market fund.) But the fund recouped its losses in just two months."
DeMaso also tells us, "Technically, the new ETF, which is due to launch in the second quarter, will be a separate entity from the existing mutual fund. This is different from Vanguard's index ETFs which are often just different share classes of the mutual funds. Still, given the same trio will be managing both the ETF and the mutual fund -- and expenses appear to be the same between the ETF and the Admiral shares of the mutual fund -- investors can expect substantially similar performance."
Lastly, he comments, "The ETF is entering a somewhat crowded space. PIMCO, BlackRock (iShares), Invesco, JP Morgan and Janus Henderson all manage active ultra-short bond ETFs with assets ranging from $3 billion to $15 billion or so. Vanguard pricing its Ultra-Short-Term Bond ETF at 0.10% is on the low end, but not the lowest -- BlackRock charges just 0.08% for their active option. Given it's an ultra-short-term bond fund, this is akin to Vanguard just dipping a toe in the pool. But it sets the stage for Vanguard to put other active funds in the ETF wrapper -- I expect to see Core Bond ETF in short order if this goes well."
According to Crane Data's latest Bond Fund Intelligence publication, competitors in the bond ETF space include: iShares Short Treasury Bond ETF (SHV); JPMorgan Ultra-Short Income ETF (JPST); PIMCO Enhanced Short Maturity Active Exchange-Traded Fund (MINT); Barclays 1-3 Month T-Bill ETF (SPDR); iShares Ultra Short-Term Bond ETF (ICSH) and Goldman Sachs Treasury Access 0-1 Year ETF (GBIL). (For more, see these Crane Data News pieces: Jan. Bond Fund Intelligence: Top Stories of '20; Worldwide BFs $12 Tril; Dec. Bond Fund Intelligence: Bond Funds Break $5 Tril; European BFs; Nov. Bond Fund Intelligence: ICI's F-I ETF Report, BlackRock's Novick; ETFdb on PGIM Ultra-Short Bond and CNBC: Schneider at Inside ETFs.)
In other news, Crane Data published its latest Weekly Money Fund Portfolio Holdings statistics Wednesday (a day late due to the MLK Holiday), which track a shifting subset of our monthly Portfolio Holdings collection. The most recent cut (with data as of Jan. 15, 2021) includes Holdings information from 78 money funds (down 14 funds from two weeks ago), which represent $2.266 trillion (down from $2.593 trillion) of the $4.623 trillion (49.0%) in total money fund assets tracked by Crane Data. (Our Weekly MFPH are e-mail only and aren't available on the website.)
Our latest Weekly MFPH Composition summary again shows Government assets dominating the holdings list with Treasury totaling $1.255 trillion (down from $1.387 trillion two weeks ago), or 55.4%, Repurchase Agreements (Repo) totaling $544.7 billion (down from $630.2 billion two weeks ago), or 24.0% and Government Agency securities totaling $277.2 billion (down from $326.4 billion), or 12.2%. Commercial Paper (CP) totaled $69.1 billion (down from $99.1 billion), or 3.0%, and Certificates of Deposit (CDs) totaled $53.7 billion (down from $60.3 billion), or 2.4%. The Other category accounted for $37.8 billion or 1.7%, while VRDNs accounted for $28.3 billion, or 1.3%.
The Ten Largest Issuers in our Weekly Holdings product include: the US Treasury with $1.260 trillion (55.6% of total holdings), Federal Home Loan Bank with $137.2B (6.1%), Fixed Income Clearing Corp with $83.5B (3.7%), BNP Paribas with $72.5B (3.2%), Federal Farm Credit Bank with $56.6B (2.5%), Federal National Mortgage Association with $49.9B (2.2%), RBC with $49.7B (2.2%), Federal Home Loan Mortgage Corp with $31.5B (1.4%), Mistubishi UFJ Financial Group Inc with $31.2B (1.4%) and JP Morgan with $29.9B (1.3%).
The Ten Largest Funds tracked in our latest Weekly include: JPMorgan US Govt MM ($197.1 billion), Goldman Sachs FS Govt ($157.7B), Wells Fargo Govt MM ($144.8B), Fidelity Inv MM: Govt Port ($140.9B), BlackRock Lq FedFund ($132.7B), Morgan Stanley Inst Liq Govt ($108.4B), BlackRock Lq T-Fund ($99.7B), JPMorgan 100% US Treas MMkt ($98.2B), Dreyfus Govt Cash Mgmt ($84.8B) and First American Govt Oblg ($82.6B). (Let us know if you'd like to see our latest domestic U.S. and/or "offshore" Weekly Portfolio Holdings collection and summary, or our Bond Fund Portfolio Holdings data series.)
