U.S. fund giant Vanguard rolls out four new Canadian bond ETFs

Share

Vanguard is pushing further into the Canadian fixed-income space with a slate of new bond ETFs, which began trading on the Toronto Stock Exchange on Tuesday.

Until now, the fund giant's Canadian presence has been primarily focused on equities, with two-dozen stock ETFs tracking a variety of indexes.

The increasing emphasis on bonds comes at a time when Vanguard is trying to reinvigorate its Canadian expansion and claim a bigger piece of the fund market.

"We're continuing to build out our range," said Tim Huver, head of products for Vanguard Investments Canada. "We've had a number of different products we've launched in the last 18 months, including target-date funds for the defined-contribution space, actively managed ETFs and now the expansion of our fixed-income ETF range."

(Target-date funds continually adjust the mix of assets, gradually getting more conservative as the target date, such as retirement, approaches.)

The new Vanguard funds include: the Canadian Government Bond ETF (VGV), the Canadian Corporate Bond ETF (VCB), the Canadian Short-Term Government Bond ETF (VSG), and the Canadian Long-Term Bond ETF (VLB).

Since launching in Canada five years ago, Vanguard has yet to attain the kind of clout in the Canadian market the firm enjoys globally.

With $3.8-trillion (U.S.) in assets under management, Vanguard is the world's largest mutual-fund manager, while its ETF business ranks second behind only BlackRock.

But in Canada, Vanguard's ETFs have less than $10-billion (Canadian) in assets, accounting for only about 9 per cent of market share.

An expanded roster of Canadian bond funds, however, covering investment-grade corporate and government securities, taps into Vanguard's considerable strength in fixed income.

The four ETFs will be sub-advised by Vanguard's U.S.-based fixed-income group, which is responsible for more than $1-trillion (U.S.) in global assets.

Bond ETFs in general have gained momentum in recent years as a more liquid way to get exposure to slices of the global bond market, Mr. Huver said. "We've seen greater interest and adoption of fixed-income ETFs, as investors recognize what the ETF provides over managing a basket of bonds."

Vanguard's expanded offering of funds, he added, now includes more of the building blocks of a diversified portfolio, even if there is rising investor anxiety toward the fixed-income space these days.