Vanguard Plans Low-Cost Junk Bond ETF As Demand For High-Yield Grows

Vanguard Group is venturing into the high-yield bond ETF space.

A Tuesday filing with the U.S. Securities and Exchange Commission suggests Vanguard High-Yield Active ETF — the firm’s first actively managed fund in the space — will have the ticker VGHY. It will invest at least 80% of assets in high-yield, or so-called “junk,” bonds.

Set to launch in the third quarter, Vanguard is pricing the competition lower with a suggested fee of 0.22%, the lowest actively managed high-yield ETF in the market, according to Bloomberg data.

The product is Vanguard’s initial foray into junk-bond exchange-traded funds, a sector that has pulled in about $11.6 billion of inflows so far this year, according to Bloomberg.

While Vanguard is most famous for its low-cost index funds, the company has been shifting increasingly toward the active side, particularly in fixed income. This year alone, it launched two other active ETFs, bringing its roster of active ETFs to 12. Across the industry, active ETF assets now represent approximately 10% of the ETF market, nearly double their proportion a decade ago.

Nevertheless, Pennsylvania’s behemoth isn’t leaping into tranquil waters. Only last week, JPMorgan Asset Management — currently the fastest-growing asset manager, rolled out its own active high-yield ETF, the JPMorgan Active High Yield ETF (BATS:JPHY), seeded with a massive $2 billion anchor investor investment by an undisclosed company.

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