Vanguard has been leading the ultra-cheap ETF market, and is easily the top choice for investors seeking low-cost products in many fund categories. This technique has proven to be a winning strategy for the company as investors have flocked in droves to these low cost products, giving Vanguard over a quarter trillion dollars in total AUM in the process (read: 3 Sector ETFs Surviving This Slump).
Many of Vanguard’s most popular funds target domestic indexes, giving investors broad exposure to American stocks. However, it should be noted that a handful of funds in the company’s lineup are undergoing a shift in how they obtain their exposure.
The firm recently announced that eight U.S. ETFs would undergo an index change from MSCI to a new family of benchmarks. Now, the eight will track University of Chicago’s Center for Research in Security Prices (:CRSP), giving a modest change for many investors.
The new index will cover stocks that have a minimum total market capitalization of more than $10 million with a float of more than 10% of the total shares outstanding. The eight ETFs are highlighted below:
Vanguard Mega Cap 300 Value ETF (MGV)
This ETF now tracks CRSP U.S. Mega Cap Value Index instead of MSCI US Large Cap Value Index. The fund name has been changed to Vanguard Mega Cap Value ETF while ticker remains unchanged.
There are about 140 less stocks in this basket, so exposure could be a bit more concentrated and tilted towards value stocks. In terms of sectors, financials and healthcare take the top two spots while energy takes the third position in the CRSP index.
MGV does a good job in spreading out across individuals as it puts 35% of the assets in top 10 holdings. Exxon Mobil (XOM), General Electric (GE) and Chevron (CVX) occupy the top three holdings in the basket with 6.4%, 3.85 and 3.6%, respectively. Other single firms do not make up for more than 3.5% of MGV.
Though the volume is quite weak, this fund has amassed $538 million in AUM since its inception in Dec 2007. The product still charges 12 bps in fees per year.
Vanguard Mega Cap 300 Growth ETF (MGK)
This ETF now follows the CRSP U.S. Mega Cap Growth Index after dropping the ‘300’ from its name. The new index holds 135 stocks with a focus on growth firms. The index is dominated by information technology with two-fifths of the assets allocated to this sector (read: Is the Tech ETF Signaling Trouble Ahead?).
In terms of holdings, this fund is also well diversified with Apple (AAPL), International Business Machines (IBM) and Google (GOOG) taking the top three positions with a combined share of 13.8%. No other firm holds more than 2.6% share, preventing heavy concentration.
MGK has seen a good AUM of $953.9 million and moderate average daily volume of roughly 123,000 shares. The fund charges 12 bps in fees per year.
Vanguard Growth ETF (VUG)
This ETF follows the new CRSP U.S. Large Cap Growth Index and holds 414 stocks in its basket. The product does a decent job of spreading assets out, as none of the securities makes up more than 5.5% of the portfolio. Apple, IBM and Google are the top three holdings with a combined share of less than 12%.
From a sector look, the fund is also well diversified with information technology and consumer discretionary taking up about 27% and 20% share, respectively. Beyond these, consumer staples (12%), industrials (12%), and healthcare (11%) round out the top five positions.
The fund is rich in AUM of $9.7 billion and average daily volume of 720,000 shares while charging 10 bps in annual fees.
Vanguard Value ETF (VTV)
This ETF tracks the CRSP U.S. Large Cap Value Index, which measures the return of large-capitalization value stocks. It has an impressive AUM of over $9 billion and a good volume of roughly 830,000 shares per day.
In terms of holdings, the product has about 415 securities in its basket with a focus on financials, energy and health care. From an individual security perspective, XOM, GE and CVX take the top three spots with none of these holding more than 5.3% (read: Two Sector ETFs Posting Incredible Gains).
The product charges investors just 10 bps a year in fees, the lowest not only in the category but among the cheapest in the broader ETF industry as well.
Vanguard Mid-Cap Growth ETF (VOT)
This fund tracks the CRSP U.S. Mid Cap Growth Index, holding 238 stocks in its portfolio. It has managed assets worth $1.4 billion so far in the year while charging 0.10% in fees. The product trades in volume of more than 93,000 shares per day (read: Mid Cap ETFs Leading the Market in 2013).
The ETF spreads out well across individual securities as none of the securities hold more than 1.2% of the assets, suggesting minimal company-specific risk. Further, all the sectors such as consumer discretionary, information technology, industrials and healthcare make a nice mix in the portfolio.
Vanguard Mid-Cap Value ETF (VOE)
This ETF now follows the CRSP U.S. Mid Cap Value Index. Holding 254 stocks in the basket, the product allocates little in each security, keeping the portfolio balanced among the various companies, and preventing concentration. However, the fund is tilted towards the financial sector, closely followed by consumer discretionary and utilities.
The product has amassed over $1.5 billion in its asset base and trades in a good daily volume of more than 130,000 shares. It costs investors just 10 bps in fees and expenses.
Vanguard Small-Cap Growth ETF (VBK)
With AUM of about $2.6 billion and daily volume of roughly 123,000 shares, VBK now tracks the CRSP U.S. Small Cap Growth Index.
The fund is well spread across various sectors and securities. Information technology takes the top spot in the basket followed by industrials, consumer discretionary and health care. With holdings of 949 securities, the ETF puts about 4.7% of the assets in top 10 firms and each security holding less than 1% share in the basket.
Vanguard Small-Cap Value ETF (VBR)
This fund now tracks the CRSP U.S. Small Cap Value Index, holding more than 1000 stocks in its basket. It has gathered about $2.8 billion in asset base and trades in volume of more than 158,00 shares per day while charging 10 bps in annual fees (read: Top Ranked Small Cap Value ETF in Focus: VBR).
The portfolio is heavily skewed towards financials, with industrials and information technology stocks rounding out the top three. In terms of individual companies, no security holds more than 0.5% share, resulting in diversification.
Bottom Line
While there are not huge differences between the old and new benchmarks, some look to be relatively modest. The number of holdings seems to be the real key, while expenses won’t be altered (see more in the Zacks ETF Center).
The group remains an interesting option for investors seeking broad exposure to certain market cap levels. This is especially true for those seeking low cost options, as Vanguard’s group will be extremely tough to beat on this front.
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