Vanguard introduced the Vanguard Short-Term Inflation-Protected
Securities Index Fund, which offers multiple mutual fund and ETF
The estimated expense ratios of the four share classes range from
0.07% to 0.20% (see table).
The new fund tracks the Barclays U.S. Treasury
Inflation-Protected Securities (
) 0-5 Year Index, a market-weighted index that measures the
performance of inflation-protected public obligations of the U.S.
Treasury that have a remaining maturity of less than five years.
The benchmark index has an average duration of 2.71 years and an
average maturity of 2.76 years.
"Vanguard believes TIPS can serve a valuable role in a
well-balanced portfolio as an inflation hedge and diversifier. The
Short-Term Inflation Protected Securities Index Fund was developed
for investors seeking inflation protection with the potential for
less volatility than other inflation hedges, including stocks,
longer-term TIPS, gold, and REITs," said Vanguard Chief Investment
Officer Gus Sauter.
The Short-Term Inflation-Protected Securities ETF
(NasdaqGM:VTIP) charges 0.10% annual expenses. To help defray the
transaction costs of purchasing TIPS, the fund assesses a 0.25%
purchase fee on all non-ETF shares.
According to Lipper, the Treasury inflation-protected securities
fund and ETF categories have average expense ratios of 0.82% and
UBS Launches High Octane Mortgage ETN
UBS Investment Bank launched the ETRACS Monthly Pay 2xLeveraged
Mortgage REIT ETN (NYSEArca: MORL) this week.
MORL is linked to the monthly compounded 2x leveraged
performance of the Market Vectors Global Mortgage REITs. The note's
leverage ratio is reset monthly and it also offers 2x leveraged
exposure to the underlying indexes' yield. Based upon September 30
data, the 2x yield was 24.82%. Distributions occur monthly and the
actual dividend yield is variable.
The mortgage REIT business model (NYSEARCA:REM) relies heavily
on the "spread" or difference between the mortgage REIT's
short-term borrowing costs and the investment yield earned by it on
its longer-termed investments. In general, wider spreads result in
greater operating margins for mortgage REITs. Narrower
spreads will generally compress margins and negatively affect
mortgage REITs. Because mortgage REITs, like all REITs, must
distribute at least 90% of their ordinary taxable income to
investors, mortgage REITs have typically produced attractive
ETNs are debt securities linked to the performance of a
benchmark. Maturities of the notes generally range from 30-40 years
and carry issuer credit risk.
MORL's maturity date is October 16, 2042 and the note charges
0.40% in annual expenses.
EG Shares Launches Emerging Markets ETF
Emerging Global Advisors unveiled the EGShares Emerging Markets
Core ETF (NYSEARCA:EMCR), which offers exposure to stocks in
countries like China, Brazil, India, and South Africa.
The S&P Emerging Markets Core Index has less industry and
mature economy concentration than conventional benchmarks such as
the MSCI Emerging Markets Index and the FTSE Emerging Index.
The initial concept for the S&P Emerging Markets Core Index
was conceived by Emerging Global Advisors. The Index, designed,
calculated, published and maintained by S&P Dow Jones Indices,
seeks to avoid the industry and mature economy concentrations of
conventional benchmarks which result from their market-cap
weighting approach, in addition to their inclusion of developed
The index uses anequal weighting strategy that's modified by
capping the exposure of each country to a 15% maximum.
EMCR has 108 holdings and a net annual expense ratio of 0.70%.
The ETF currently does not use options, swaps or other derivatives
in its portfolios.
New "Enhanced Money Market" ETF
Another new fund is the FlexShares Ready Access Variable Income
Fund (NYSEARCA:RAVI) which began trading last week. The new ETF is
actively managed and aims to preserve capital, keep high liquidity,
and reach for enhanced returns. No yield information is currently
Currently, RAVI has just 18 holdings and the bulk of its country
exposure is the U.S. The fund caps market exposure to asset backed
securities (10%), single countries (25%), and emerging markets
(20%). RAVI has an effective duration of 0.47 years and the net
expense ratio is 0.25%.
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