Will Vanguard Manage to Crack the Active ETF Market?

By launching a range of active factor ETFs, Vanguard looks to ride two waves at the same time: smart - also know as strategic - beta and active ETFs

Hortense Bioy, CFA 21 December, 2015 | 4:28PM
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On December 10, Vanguard launched four new European-domiciled actively managed ETFs which provide global exposure to four factors – value, liquidity, momentum and low volatility.

For a number of reasons, Vanguard’s move has confounded industry observers. After all, the company is essentially known in Europe as a passive manager, and one that has prided itself in offering broad, plain-vanilla exposures. While funds looking to harness equity factors are proliferating, they remain a nebulous concept for most investors. Factor investing, also known as ‘smart beta’ in the passive world, is anything but simple. Quite the contrary, it requires a great deal of education and due diligence.

Moreover, while Vanguard has in the past shared plans to grow an active business in Europe – as it already has in the US – some may find it surprising that it has chosen to do it using the ETF wrapper.

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About Author

Hortense Bioy, CFA

Hortense Bioy, CFA  is global head of sustainability research at Morningstar