Vanguard today launched the Vanguard Short-Term Inflation-Protected Securities Index Fund, which offers low-cost conventional shares (Investor, Admiral™, and Institutional) and ETF Shares.
The estimated expense ratios of the four share classes range from 0.07% to 0.20% (as shown in the accompanying table). The Treasury inflation-protected securities fund and ETF categories have average expense ratios of 0.82% and 0.20%, respectively (source: Lipper, Inc.).
The new fund seeks to track the performance of the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index, a market-weighted index that measures the performance of inflation-protected public obligations of the U.S. Treasury that have a remaining maturity of less than five years. The benchmark index has an average duration of 2.71 years and an average maturity of 2.76 years.
“Vanguard believes TIPS can serve a valuable role in a well-balanced portfolio as an inflation hedge and diversifier. The Short-Term Inflation Protected Securities Index Fund was developed for investors seeking inflation protection with the potential for less volatility than other inflation hedges, including stocks, longer-term TIPS, gold, and REITs,” said Vanguard Chief Investment Officer Gus Sauter.
The short-term fund is a complement to the $44.3 billion Vanguard Inflation-Protected Securities Fund, a broad-market TIPS fund with an average duration of 8.5 years and an average maturity of 9.4 years.
The new fund offers a different risk-return tradeoff than that offered by the existing Inflation-Protected Securities Fund. Given its shorter duration, the new fund can be expected to have less real interest rate risk, but also lower total returns. The existing TIPS fund should appeal to inflation-sensitive investors with a long time horizon who are seeking diversification benefits and potentially higher returns, but can accept potentially greater net asset volatility.
Vanguard’s Fixed Income Group, which oversees nearly $640 billion in assets, will serve as investment advisor to the fund. The co-managers of the fund are Joshua Barrickman and Gemma Wright-Casparius, who together have a combined 40 years of fixed income management experience. Mr. Barrickman has been with Vanguard since 1998 and manages several Vanguard bond index funds and ETFs. Ms. Wright-Casparius joined Vanguard in 2011 and manages the Vanguard Inflation-Protected Securities Fund.
The Short-Term Inflation-Protected Securities ETF will trade on Nasdaq under the ticker VTIP. To help defray the transaction costs of purchasing TIPS, the fund assesses a 0.25% purchase fee on all non-ETF shares.
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard managed nearly $1.95 trillion in U.S. mutual fund assets as of September 30, 2012. The firm offers more than 170 index funds, active funds and ETFs to U.S. investors and more than 70 additional funds and ETFs in non-U.S. markets. For more information, visit www.vanguard.com
All figures are as of September 30, 2012, unless otherwise noted.
All ETFs are subject to risk, including possible loss of principal. Bond funds are subject to the risk an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments. U.S. government backing of Treasury or agency securities applies only to the underlying securities and does not prevent share-price fluctuations. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest. Diversification does not ensure a profit or protect against a loss.
For more information on Vanguard funds, visit www.vanguard.com, or call 800-662-7447, to obtain a prospectus. Visit our website, call 800-662-7447, or contact your broker to obtain a prospectus for Vanguard ETF Shares. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
Vanguard ETF Shares are not redeemable with the issuing Fund other than in Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
The Vanguard ETFs are not sponsored, endorsed, sold or promoted by Barclays. Barclays does not make any representation regarding the advisability of Vanguard ETFs or the advisability of investing in securities generally. Barclays' only relationship with Vanguard is the licensing of the Index which is determined, composed and calculated by Barclays without regard to Vanguard or the Vanguard ETFs. Barclays has no obligation to take the needs of Vanguard or the owners of the Vanguard ETFs into consideration in determining, composing or calculating the Index. Barclays has no obligation or liability in connection with administration, marketing or trading of the Vanguard ETFs.
U.S. Pat. No. 6,879,964 B2; 7,337,138; 7,720,749; 7,925,573; 8,090,646.
Vanguard Marketing Corporation, Distributor.
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