“Grass grows, birds fly, waves pound the sand, I beat people up,” Muhammad Ali once said, a sentiment that Jack Bogle could very well repurpose for his own vocation – namely, appearing on whatever investment panel, TV segment, newspaper column, bar mitzvah or radio spot that will have him and answering any and every question thrown his way with the words “passive investing.” It is a mission that has sustained him for 88 years, and it seems to be a strongly held enough conviction to keep him going for about 88 more.
So you'd think Bogle would notice the firm built in his image doing something like this:
Starting in 2018, investors can dump their money into deeply unBogle-like, totally non-passive Vanguard exchange-traded vehicles with flavors like volatility, momentum, value, and, for some reason, low liquidity. Somehow, the fund announcement didn't betray any sense of shame:
"Our factor-based fund offerings serve as a valuable extension of 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 can now harness well-known factor exposure in a more transparent and low-cost way."
For those who haven't been paying close attention, this isn't Vanguard's first ETF foray into Activeland, though it is new stateside. You can currently buy ETFs for British and Canadian equities managed by actual stock-picking Vanguard-employed humans. This has been a long time coming.
But there's still a little of the old Bogle spirit in the news. Vanguard seems to be studiously avoiding marketing its fancy new toys to retail investors: “Five single factor funds are designed for financial advisors and institutional investors seeking to achieve specific risk or return objectives through targeted factor exposures,” the statement reads, sans italics. Mom and pop are implicitly encouraged not to wade into the fraught and perilous world of sentient beings using their brains to choose stocks.
Contrary as they might seem to Vanguard's brand, however, the new funds do feature what the company calls “the traditional characteristic of all Vanguard funds” and what everyone else knows as “the thing that will put me out of business” – rock-bottom fees.
The five single factor-based ETFs will have an estimated expense ratio of 0.13%; the Multifactor ETF and Multifactor Fund will have an estimated expense ratio of 0.18%. The Multifactor Fund will require a minimum initial investment of $50,000 for Admiral Shares.
Have fun with that, AQR.