Vanguard Expands Tax-Exempt Bond Lineup with New ETF

Vanguard

VALLEY FORGE, PA — Vanguard announced plans to introduce Vanguard Short-Term Tax-Exempt Bond ETF (Ticker: VTES), a municipal bond index ETF that will be managed by Vanguard Fixed Income Group. Vanguard intends to launch the ETF in the first quarter of 2023.

“Vanguard provides a broad yet carefully constructed lineup of investment options tailored to the needs of our diverse investor base with the goal of giving them the best chance for investment success,” said Daniel Reyes, head of Vanguard Portfolio Review Department. “The new Short-Term Tax-Exempt Bond ETF has been thoughtfully constructed for tax-sensitive investors with a short time horizon and low risk tolerance, in complement to our broad range of municipal bond strategies.”

The ETF is intended for investors seeking to generate tax-exempt yield in their portfolios while minimizing interest rate sensitivity. It will predominantly invest in short-term investment grade municipal bonds and will track the S&P® 0-7 Year AMT-Free Muni Bond index. The ETF will have an estimated expense ratio of 0.07%, compared to 0.54%1 for the average short-term bond fund.

A global fixed income leader
For more than 40 years, Vanguard Fixed Income Group has distinguished itself with deep investment capabilities, disciplined security selection processes, and rigorous risk management techniques, resulting in consistent, long-term performance. Vanguard’s track record remains unparalleled—87% of Vanguard bond funds outperformed their peer group averages over the ten-year period ending September 30, 2022.2

Vanguard’s $199 billion municipal bond lineup includes a wide range of actively managed national, state-based, high-yield, and money market funds, as well as the $20.8 billion Vanguard Tax-Exempt Bond ETF (Ticker: VTEB). The new ETF will complement our existing actively managed limited-term and ultra-short-term tax-exempt mutual funds.

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Vanguard’s municipal bond team comprises 40 tenured portfolio managers, traders, and analysts that leverage their deep experience, scale, and sophisticated processes to navigate this complex segment of the fixed income market. Stephen McFee, a portfolio manager in Vanguard Fixed Income Group, will manage the new fund. Mr. McFee joined Vanguard in 2005 and currently manages multiple municipal bond funds, including Vanguard Tax-Exempt Bond Index Fund.

All figures as of November 30, 2022, unless stated otherwise.

1 Source: Lipper as of December 31, 2021.

For the ten-year period ended September 30, 2022, 75 of 86 Vanguard bond funds outperformed their peer group averages; results will vary for other time periods. Only funds with a minimum ten-year history were included in the comparisons. (Source: Lipper, a Thomson Reuters Company) Note that this competitive performance data represents past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit our website at www.vanguard.com/performance.

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