Vanguard ETFs are officially a $1 trillion business.
The investment giant’s assets under management for exchange-traded funds topped that milestone this week, a big step for the firm behind the most popular ETF in the market: the Vanguard S&P 500 ETF, ticker VOO.
Now, ETFs are 20% of Vanguard’s total assets, which amount to $5.6 trillion. ETFs also accounted for “about 35% of our cash flows over the last three years,” more than any other share class in the ETF space, Rich Powers, Vanguard’s head of ETF product management, said Monday on CNBC’s “ETF Edge.”
So far this year, VOO has seen roughly $10 billion in cash flows as investors seek to hedge their existing bets or simply snag a piece of the pie, Powers said. With stocks at record highs, the Vanguard Total World Stock Index Fund ETF (VT) and Vanguard Total Bond Market Index Fund ETF (BND) are also seeing increased interest, he said.
Vanguard is responding to the enthusiasm by expanding its suite of investment options. Last year, the firm launched six actively managed factor-based ETFs to accommodate investors looking for more targeted exposure, particularly to things like value, momentum, quality, liquidity and minimum volatility.
The challenge? “Active [management] requires a track record,” Powers said. “We’re about 18 months into their life cycle. It’s a different concept, and so there’s lots of education we’re doing in terms of teaching investors how to invest with factors. It’s not appropriate for all investors, but for some investors, they want to have very specific exposures.”
Exposure is becoming an increasingly hot topic in the ETF market with some large-cap technology companies including Amazon accounting for huge portions of certain funds and the broader market, and Powers had an answer for that, too.
“The current weight of the S&P [500] and the top 10 is really no different than it was 10, … 15, 20 years ago. The constituents are a little bit different, ” Powers said. “If you were concerned about that, then you would go to a much broader fund and buy a total-world ETF, where you’re holding the entire world market cap, and that reduces your exposure to the top 10.”
VOO was less than 1% higher on Friday after touching a new 52-week high. VT and BND were also up by less than 1%.
