Vanguard launches suite of factor-based products

February 15, 2018 (Updated April 6, 2018)

 
Factors: Get the facts Explore our new product lineup

Vanguard has launched a suite of rules-based, low-cost, actively managed equity products that has the added benefit of more targeted, consistent exposures to the desired factors, such as minimum volatility, quality, value, liquidity, and momentum.

The actively managed, rules-based factor products—six ETFs and a mutual fund—represent the first Vanguard active ETFs available to investors in the United States. They expand our already extensive low-cost active fund selection. Vanguard Quantitative Equity Group, which has more than 25 years of quantitative investing experience, will serve as investment advisor.

"I'm excited that this suite of active ETFs extends our mission of lowering the cost of investing. Our aim is to offer the transparency of index-based factor products with the potential advantages of active flexibility to maintain more targeted and consistent exposures to desired factors," said Vanguard Chief Investment Officer Greg Davis.

"As always, Vanguard has taken a very deliberate and carefully researched fund-development approach. Each new factor-based product must adhere to an enduring, logical rationale backed by empirical evidence, offer long-term investability, and, of course, be low-cost," Davis said.

These factor funds were developed to provide financial advisors with another targeted, low-cost offering for clients who have specific investment objectives that focus on factors.

Factor lineup

Fund nameTicker symbol Expense ratio1Investment approach
Vanguard U.S. Value Factor ETFVFVA0.13% Targets U.S. stocks with lower market valuations relative to fundamentals, such as book value of equity and earnings. Relatively inexpensive stocks have tended to earn a higher return than expensive stocks.2
Vanguard U.S. Quality Factor ETFVFQY0.13%Targets U.S. stocks with strong operational, earnings, and balance sheet quality. Stocks with strong fundamentals have tended to earn a higher return than those with weak fundamentals.2
Vanguard U.S. Momentum Factor ETF VFMO 0.13% Targets U.S. stocks with strong recent performance, which have tended to earn a higher return than those with weak recent performance.2
Vanguard U.S. Liquidity Factor ETF VFLQ 0.13% Targets U.S. stocks that are relatively less liquid. Less liquid stocks have tended to outperform more liquid stocks.2
Vanguard U.S. Minimum Volatility ETF VFMV 0.13% Targets a group of U.S. stocks that, when combined in a portfolio, minimize volatility relative to the broad market.2
Vanguard U.S. Multifactor ETF VFMF 0.18% Targets three factors: value, momentum, quality, after an initial volatility screen.  Such a strategy offers potential diversification benefits that can help reduce the active risk associated with exposure to a single factor.
Vanguard U.S. Multifactor Fund Admiral™ Shares VFMFX 0.18% Targets three factors: value, momentum, quality, after an initial volatility screen.  Such a strategy offers potential diversification benefits that can help reduce the active risk associated with exposure to a single factor.

The new products join Vanguard's actively managed lineup of stock, bond, balanced, and money market mutual funds representing $1.2 trillion in assets under management as of December 31, 2017.

The Quantitative Equity Group currently manages more than $39 billion in assets across more than 35 mandates, including Vanguard's first active factor fund, Vanguard Global Minimum Volatility Fund, launched in December 2013.

There are no minimum investment requirements for ETF Shares of the funds. For financial advisor clients (excluding supermarkets), investment minimums are not required to open and maintain accounts for Admiral Shares of the funds.

Learn how our factor products give you another tool in the low-cost active tool kit in Tom Rampulla's blog post or access educational resources, portfolio construction ideas, and product details at our Factor Center.

1 Estimated expense ratio as of February 15, 2018.

2 Scott N. Pappas and Joel M. Dickson, 2015. Factor-based investing. Valley Forge, Pa.: The Vanguard Group.

Notes:

  • Vanguard ETF Shares are not redeemable with the issuing fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
  • All investing is subject to risk, including the possible loss of the money you invest.
  • Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility.
  • Factor funds are subject to investment style risk, which is the chance that returns from the types of stocks in which the fund invests will trail returns from U.S. stock markets. Factor funds are subject to manager risk, which is the chance that poor security selection will cause the fund to underperform relevant benchmarks or other funds with a similar investment objective.
 

Our insights straight
to your inbox

Our insights straight to your inbox

Receive our latest Advisor's Digest
research
and commentary sent the
first business
morning every week.

A weekly digest of our latest research and commentary. Topics include the economy and markets, portfolio strategy, ETFs, and practice management.


Fund openings/closings, fund manager changes, dividend distributions, webinars, and other events you might want to know about.



Already registered? Log on to
manage your
email subscriptions.

Advisor's Digest

for December 10, 2018

Advisor's Digest for December 10, 2018

Advisor's Digest

for December 10, 2018