Vanguard Launches Tax-Exempt Bond Index Fund

The firm's first municipal bond index fund features low-cost ETF Shares

Aug 25, 2015, 09:00 ET from Vanguard

VALLEY FORGE, Pa., Aug. 25, 2015 /PRNewswire/ -- Vanguard today introduced its first municipal bond index fund, Vanguard Tax-Exempt Bond Index Fund. The fund will offer three low-cost share classes, including exchange-traded fund (ETF) shares.

"Vanguard is a pioneer in index investing and a leader in municipal bond fund management. Our new fund enables us to leverage our experience and expertise in both of these areas," said Vanguard CEO Bill McNabb. "Not only did we offer the first index mutual fund to individual investors, but we were also the first to offer investors a choice among municipal bond funds of differing maturities. We are pleased to now provide a low-cost tax-exempt option for investors who prefer an index approach."

Vanguard Tax-Exempt Bond Index Fund

Share class

Ticker

Expense ratio

Fund minimums

Purchase fee1

ETF

VTEB

0.12%

N/A

N/A

Investor

VTEBX

0.20%

$3,000

0.25%

Admiral

VTEAX

0.12%

$10,000

0.25%

1Conventional share classes include a purchase fee to defray portfolio transaction costs and enable the fund to more closely track its benchmark.

The Admiral and ETF shares of the fund feature expense ratios of 0.12%. The municipal bond funds in Lipper's General and Insured Municipal Debt Funds category have an average expense ratio of 0.95%; comparable ETFs in the category have an average expense ratio of 0.28% (source: Lipper, a Thomson Reuters Company, December 31, 2014).

A focus on quality, liquidity, and talent
The fund's target benchmark is the S&P® National AMT-Free Municipal Bond Index. It seeks to offer diversified exposure to the national municipal bond market, representing bonds with maturities across the yield curve and an effective duration between 5-8 years. The index reflects a higher-quality, investment-grade universe that focuses on the more liquid portion of the market.

"We believe a fund focused on high-quality municipal securities with greater liquidity relative to the overall municipal bond market will reduce credit and liquidity risk. The fund will also benefit from our deep and long-tenured municipal market team, as well as our scale, to minimize trading costs and closely match the benchmark's risk characteristics. At the same time, the fund will carry the interest rate risk consistent with medium- to long-term bonds," said Chris Alwine, head of Vanguard's Municipal Bond Group.

Vanguard is the largest provider of municipal bond funds in the industry. It launched its first municipal bond funds in 1977 and now manages $118 billion in tax-exempt bond funds and $27 billion in tax-exempt money market funds. In addition to the newly launched Vanguard Tax-Exempt Bond Index Fund, Vanguard manages 12 actively managed municipal bond funds and 6 tax-exempt money market funds, including both national and state-specific funds.

Adam Ferguson, a portfolio manager in Vanguard Fixed Income Group, will manage the new fund. Mr. Ferguson joined Vanguard in 2004 and currently manages multiple municipal bond funds.

Vanguard has a team of approximately 40 municipal bond investment professionals, including portfolio managers, senior credit research analysts, research associates and traders. The firm has a 15-person credit research team that performs detailed analysis on individual credits and collaborates closely with our portfolio managers and traders.

A leader in ETFs
Vanguard now offers 68 low-cost ETFs in the United States, including 16 bond ETFs with more than $75 billion in assets. Vanguard continues to be among the leaders in ETF cash flow and assets. Investors entrusted more than $75 billion to our ETFs in 2014 and over $45 billion in 2015 through July.

About Vanguard
Vanguard is one of the world's largest investment management companies. As of July 31, 2015, Vanguard managed more than $3.3 trillion in global assets, including nearly $478 billion in ETF assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 298 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com. 

All asset figures are as of July 31, 2015, unless otherwise noted. Source: Vanguard

For more information about Vanguard funds, visit vanguard.com or call 800-662-7447 to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.

The S&P National AMT-Free Municipal Bond Index (the "Index") is a product of S&P Dow Jones Indices LLC and has been licensed for use by Vanguard. S&P® and S&P National AMT-Free Municipal Bond™ are trademarks of Standard & Poor's Financial Services LLC ("S&P") and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"). These trademarks and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for certain purposes by Vanguard. Vanguard Tax-Exempt Bond Index Fund is not sponsored, endorsed, sold, or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P, or their respective affiliates, and none of S&P Dow Jones Indices LLC, Dow Jones, S&P, nor their respective affiliates make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Index.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.

All investments are subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bond funds are subject to interest rate, credit, and inflation risk. Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund's trading or through your own redemption of shares. For some investors, a portion of the fund's income may be subject to state and local taxes.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

Vanguard Marketing Corporation, Distributor.

© 2015 The Vanguard Group, Inc. All rights reserved.

SOURCE Vanguard



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