Vanguard presents low-cost ETF challenge to actives

ETFsVanguard has launched a range of active exchange-traded funds (ETFs) on the London Stock Exchange as a “compelling alternative” to active funds that target investment factors, such as value and momentum.

The ETFs provide equity exposure to areas such as under-valued stocks, which are selected for the firm’s Value Factor ETF, and stocks that have seen strong share price performance in the previous 12 months, which are bought for Vanguard’s Momentum Factor ETF.

These factors are often considered as part of the broad ‘smart beta’ category, but Vanguard’s quantitative equity group, which manages the fund, is not tracking indices, meaning the products are not passive in nature.

There is also the Liquidity Factor ETF, which invests in less frequently traded stocks with the potential to outperform, and the Minimum Volatility ETF.

Axel Lomholt, head of product for Vanguard’s international business, says: “We believe these ETFs offer a compelling alternative to high-cost active strategies that target similar exposures.

“Vanguard has chosen to take an active approach to managing these funds by using quantitative models to select stocks and build a portfolio that targets the desired factor whereas other managers may track an index to implement a factor-based strategy.”

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