Vanguard (finally) rounded out its U.S. style index options Thursday morning, as it launched new funds tied to mid-cap growth and mid-cap value indexes from MSCI. The company already offers U.S. growth and value index funds in the large and small cap space; now, it covers the full spectrum.
All the major fund companies have been working to launch full slates of style funds of late, particularly in the ETF space, where the financial adviser marketplace has strongly embraced ETFs as the tools to use for asset allocation and/or core-satellite strategies. Recently, a number of hedge funds have also launched style-based long/short funds that use ETFs – say, going long large-cap growth and short small-cap value - and the demand only seems to grow..
The new Vanguard funds are available as both traditional mutual funds and ETFs. That appears to be the new, standard operating procedure at Vanguard, as the company has finally embraced its growing ETF business. The press release announcing the new mid-cap funds actually touts the growing strength of the company's ETF franchise, noting that they now manage $16.4 billion in ETF assets among 26 funds. That's quite a change from years past, when ETFs were the black sheep of the Vanguard family
The ETF tickers for the new Vanguard Mid-Cap Value Index and Vanguard Mid-Cap Growth funds are VOE and VOT, respectively; the traditional mutual funds trade as VMVIX and VMGIX. The ETFs trade on the American Stock Exchange.
The funds come with Vanguard’s customary and commendable low expense ratios: The mutual funds charge 25 basis points, while the ETFs charge just 13 basis points. According to Vanguard, the ETF fees are half those of its nearest competitors -- which would be State Street Global Advisor, whose Dow Jones Wilshire style ETFs charge 25 basis points. They are the streetTRACKS DJ Wilshire Mid Cap Growth ETF (NYSE:EMG) and the streetTRACKS DJ Wilshire Mid Cap Value ETF (EMV). (More info about them on SSgA's web site.)
In an era of undeniable expense ratio creep, with some funds now charging upwards of 70 basis points, the 13 basis point fee from Vanguard is refreshing.