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(Bloomberg) — Asset-management big Vanguard Group is shutting down one in all its US exchange-traded funds for the primary time.
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The $39.7 million Vanguard U.S. Liquidity Issue ETF (ticker VFLQ) will likely be liquidated in late November, the agency mentioned in a press launch Monday. The fund “has not gained scale since its 2018 debut,” Vanguard mentioned.
The closure would be the first and solely liquidation of an American ETF for the Jack Bogle-founded agency because the $244 billion Vanguard Complete Inventory Market ETF (VTI) launched in 2001.
Malvern, Pennsylvania-based Vanguard controls almost $1.8 trillion in belongings throughout 82 US ETFs and is thought mainly for its ultra-low price, index-hugging funds. Actively-managed VFLQ, which carries a payment of 13 foundation factors, was an “odd match” from the get-go, in accordance with VettaFi’s Dave Nadig.
“It’s not tremendous shocking that they’d shut the laggards down,” mentioned Nadig, monetary futurist on the information supplier. “As for why now? No one cares if you shut merchandise in a bear market.”
The liquidation comes as volatility ripples throughout asset lessons, with central banks across the globe making an attempt to chill red-hot inflation. That turmoil is exhibiting up within the $6 trillion ETF business, the place 91 funds have shuttered to date this yr in contrast with simply 71 closures for all of 2021, Bloomberg information present.
VFLQ, which seeks to make the most of the premium related to less-liquid shares, has misplaced about 23% this yr. That compares to a 22% loss for the S&P 500 Complete Return Index.
Vanguard’s resolution to delist VFLQ additionally illustrates how crowded the ETF business has turn into, within the eyes of Morningstar’s Ben Johnson.
“If the Ok-Pop ETF and filings for double-levered AMC ETFs weren’t ok indicators that the ETF market is getting oversaturated, then possibly this Vanguard information will ship a clearer sign,” mentioned Johnson, Morningstar’s head of consumer options for asset administration.
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