International fund manager Vanguard has launched an active exchange-traded fund (ETF) made up of a diversified portfolio of global shares.
The Vanguard Global Multi-Factor Active ETF looks to generate return by combining value, momentum and quality investing.
The manager is incorporating these elements in its investment strategy having identified them as the underlying components that influence how an investment behaves and as such can be used to generate a return premium.
Individuals and advisers wanting to include factor strategies in investment portfolios without having to select or rebalance between single factors have been identified as suitable users of the offering.
“We are delivering on our commitment to offer investors more low-cost active fund options with the addition of this multi-factor strategy, which has been sought-after by advisers following the introduction of our value and minimum volatility factor offerings,” Vanguard investment product strategy manager Rachel White said.
“Globally we’ve seen good adoption of this multi-factor strategy with the blending of factors helping to smooth returns, reduce downside risk and provide diversification benefits.
“Investors can use the fund or ETF as a core global equity holding which can act as a lower-cost substitute to a high-cost active equity strategy. The strategy could also complement an index portfolio for investors seeking to add outperformance potential while maintaining low costs.”
According to White, the use of active management will allow Vanguard to provide investors with more consistent factor exposure as shareholding weights will be determined by factor exposure rather than market capitalisation.
“Active implementation helps to keep costs to a minimum by carefully evaluating the trade-off between rebalancing needs and trading costs,” she said.
A managed fund has been launched in conjunction with the ETF, with both being open for investment today. The ETF has an annual management fee of 0.33 per cent, while the fund has a fee of 0.35 per cent.
Vanguard’s Quantitative Equity Group will manage the fund.