Vanguard Adds Mid-cap Growth and Value ETFs to its Lineup; Hopes to Lure Intermediary Investors

 |  Includes: MDY, VO, VOE, VOT
by: SA Eli Hoffmann

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Vanguard Expands ETF Offerings

  • Summary: Vanguard Group has a reputation for selling directly to thrifty investors, retirement plans, and institutional investors, who appreciate its low fees. Until now brokers were not a serious part of its corporate picture. But with the recent proliferation of ETFs (Exchange Traded Funds) that track indexes but trade (and pay commissions) like stocks, brokers can steer clients to ETFs that suit their needs, where in the past they had lost them to Index-tracking mutual funds. Vanguard, it seems, wants a bigger piece of that pie. In the past few weeks they listed ETFs for mid-cap growth and value components, which target brokers and financial advisors. Advisor asset-flow is growing faster than Vanguard's other lines, and this newest effort reflects that, and their desire to further cater to the needs of intermediaries. U.S. mid-caps have outperformed the broader S&P 500 (14.5% vs. 5.4% annal) over the past five years.
  • Comment on related stocks/ETFs: As the article notes, Vanguard is hardly the first one on the block with mid-cap growth ETFs. They join: iShares Morningstar Mid Growth Index ETF (NYSEARCA:JKH), streetTRACKS Dow Jones Wilshire Mid Cap Growth ETF (NYSE:EMG), iShares S&P MidCap 400 Index ETF (NYSEARCA:IJH), PowerShares Dynamic Mid Cap Growth ETF (PWJ), and Rydex S&P MidCap 400 Pure Growth (NYSEARCA:RFG), MidCap SPDRs ETF (NYSEARCA:MDY). Vanguard's offerings: Vanguard Mid-Cap ETF (NYSEARCA:VO) (that's Vanguard's original offering [Mid-Cap VIPERs] with a name-change), Vanguard Mid-Cap Value ETF (NYSEARCA:VOE), and Vanguard Mid-Cap Growth ETF (NYSEARCA:VOT). Vanguard is banking that its reputation for no-frills low-expense offerings will attract funds; the new ETFs are competitively priced with expenses of 0.13% each. Yaser Anwar sees the potential for continued growth in mid-cap ETFs. (Since that article, MDY has gone above and below its ever-flattening 50 DMA without managing to breakout in either direction.) One thing is for sure: If you're already exposed to the mid-cap ETF market, don't change to Vanguard no matter how much of a fan you may be; the correlation between ETFs is high, and paying double commissions will kill any potential gain and then some.

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