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Vanguard has $2.7 trillion in exchange traded fund assets under management, making it the second-largest ETF issuer in the world. It’s more than twice as large as the third-place issuer and is closing in on the top spot currently held by BlackRock’s iShares.
Just this year, Vanguard has hauled in $126 billion in new ETF assets. Said another way, Vanguard’s ETFs inflows throw barely more than six months would be the ninth-largest U.S. ETF sponsor. The firm offers 86 ETFs to domestic advisors and investors – a lineup that is comparatively small relative to the three other issuers representing the top four, but still “large.”
Add to that, none of Vanguard’s ETFs are “small” when applying the $100 million in assets under management standard. In fact, 70 of the 86 Vanguard ETFs have at least $1 billion in assets under management. Put all those factors together and it’s a stretch to say Vanguard ETFs are overlooked, but a few might just fit that bill. Let’s examine such a trio here.
Bonds, Small-Cap Value Ignored…Sort Of
Neither the Vanguard Total International Bond ETF (BNDX) nor the Vanguard Small-Cap Value ETF (VBR) are small. BNDX has $55.6 billion in assets while VBR is a $27.1 billion ETF. However, both address asset classes that advisors and investors haven’t been fond of in recent years.
With domestic aggregate bond strategies lagging, many asset allocators simply aren’t rushing to international bond funds and with mega-cap growth stocks powering the broader equity market higher, value and small-cap stocks, though they’re generating positive returns, aren’t fashionable.
Specific to VBR, the ETF has an impressive long-term track record, a low fee (just 0.07%) and an index that mitigates other costs of ownership – all factors that are appealing to advisors and patient clients. Those traits also imply though VBR isn’t overlooked in the strictest sense of the word, it might be deserving of more attention.
“So far, that combination has been a recipe for success. VBR beat the average fund in the small-value category by 2 percentage points per year between January 2010 and December 2019. That was a decade that saw smaller and cheaper stocks struggle to perform well against the broader market. And it’s continued to outperform many of its peers over the past 4.5 years,” notes Morningstar analyst Daniel Sotiroff.
Big Kahuna Flies Under the Radar
There’s nothing diminutive about the Vanguard Total World Stock ETF (VT). The fund holds 9,823 stocks and is home to $36.3 billion in assets under management, but despite those statistics, VT leads a quiet existence.
“VT, provides exposure to the entire global stock market in a single low-cost package. It includes nearly 10,000 stocks of all sizes from the US, foreign, and emerging markets. This ETF is so broad that you could reasonably use it as the only stock ETF in your portfolio,” adds Sotiroff.
Something for advisors to remind investors of when it comes to VT and funds of this ilk. Funds with “global” or “world” in the titles hold U.S. assets. International funds do not. In the case of VT, the Vanguard ETF allocates nearly 62% of its weight to domestic equities.