Vanguard to offer suite of factor-based products

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Vanguard said today it plans to introduce a suite of products offering low-cost, targeted, and transparent exposure to well-known market factors.

Chief Investment Officer Greg Davis 

The actively managed, rules-based factor products—six exchange-traded funds (ETFs) and a mutual fund—are expected to be available around mid-February 2018, according to a registration statement filed with the U.S. Securities and Exchange Commission. Vanguard Quantitative Equity Group, which has more than 25 years of quantitative investing experience, will serve as investment advisor.

"Our factor-based fund offerings serve as a valuable extension to our low-cost active lineup, providing additional ways for suitable investors to help meet their long-term objectives by targeting exposure to specific factors in the market," said Vanguard Chief Investment Officer Greg Davis. "With Vanguard's actively managed, rules-based approach to factors, investors will be able to harness well-known factor exposure in a more transparent and low-cost way."

The proposed factor products and the objectives theyÂ’ll pursue are:

Vanguard U.S. Value Factor ETF—Long-term capital appreciation by investing in stocks with relatively lower share prices relative to fundamental values as determined by the advisor.

Vanguard U.S. Quality Factor ETF—Long-term capital appreciation by investing in stocks with strong fundamentals as determined by the advisor.

Vanguard U.S. Momentum Factor ETF—Long-term capital appreciation by investing in stocks with strong recent performance as determined by the advisor.

Vanguard U.S. Liquidity Factor ETF—Long-term capital appreciation by investing in stocks with lower measures of trading liquidity as determined by the advisor.

Vanguard U.S. Minimum Volatility ETF—Long-term capital appreciation with lower volatility relative to the broad U.S. equity market.

Vanguard U.S. Multifactor ETF and Vanguard U.S. Multifactor Fund Admiral™ Shares—Long-term capital appreciation by investing in stocks with relatively strong recent performance, strong fundamentals, and low prices relative to fundamentals as determined by the advisor.

Factor-based funds can be used in a number of portfolio applications—such as substituting for a high-cost active fund, creating a static tilt to seek enhanced returns or dampened volatility, or filling a portfolio gap.

The new products will join Vanguard's actively managed lineup of stock, bond, balanced, and money market mutual funds representing $1.2 trillion in assets, or roughly 27% of the company's total assets under management as of October 31, 2017.

The Quantitative Equity Group currently manages more than $30 billion in assets across more than 35 mandates, including the firm's first active factor fund, Vanguard Global Minimum Volatility Fund, launched in December 2013.

The new offerings are expected to carry the following expense ratios.

Fund or ETF	Estimated expense ratio
U.S. Value Factor ETF	0.13%
U.S. Quality Factor ETF	0.13%
U.S. Momentum Factor ETF	0.13%
U.S. Liquidity Factor ETF	0.13%
U.S. Minimum Volatility ETF	0.13%
U.S. Multifactor ETF	0.18%
U.S. Multifactor Fund Admiral Shares	0.18%

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.