Vanguard Group Inc. is bringing its decades-long relationship with Wellington Management into the ETF structure. It is launching three active equity ETFs. This marks the indexing giant’s first venture into actively managed equity products in the wrapper.
The November launches — the Vanguard Wellington U.S. Value Active ETF (VUSV), the Vanguard Wellington U.S. Growth Active ETF (VUSG), and the Vanguard Wellington Dividend Growth Active ETF (VDIG) — tap into strategies that have run in mutual fund form for years, according to this week’s ETF Prime.
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Additionally, the move reflects Vanguard’s efforts to meet client demand for active equity ETF strategies. It aims to do this while leveraging its $700 billion in active equity assets across 40 funds. This is according to Ryan Barksdale, head of active equity product at Vanguard.
Vanguard aims to deliver its strongest capabilities in the vehicle clients prefer, with the ETFs serving as core building blocks accessed in a low-cost, transparent and tax-efficient manner, Barksdale said on the podcast.
Wellington Management has served as Vanguard’s longest-standing partner for 50 years, according to the podcast. The three new ETFs represent an extension of that collaboration into the actively managed ETF space, with each strategy drawing on Wellington’s existing portfolio management teams.
VUSG focuses on innovation-based companies, with portfolio managers bringing backgrounds in technology and healthcare sectors, according to Kim Galen, head of equity boutiques at Wellington Management. VUSV employs an opportunistic value approach similar to the Vanguard Windsor fund, while VDIG offers a more concentrated version of Vanguard’s flagship dividend growth mutual fund.
Building Active ETF Lineup
Galen said the firm’s edge comes from identifying market inefficiencies through “a clearly articulated philosophy and process,” particularly in innovation-heavy sectors.
“A lot of the innovation that we’re seeing in the global economy is coming from technology,” Galen said. “That really underpins some of their edge in identifying these innovative companies.”
Barksdale indicated Vanguard plans to continue evaluating its active strategies for ETF conversion. The firm works with more than 20 sub-advisory firms beyond Wellington, including its own internal quantitative equity group, giving it flexibility in product development decisions, Barksdale said.
Looking ahead, Barksdale said Vanguard will offer clients a comprehensive lineup. It will focus on the option to build portfolios with active equity ETFs alongside passive and active fixed income products.
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