New Vanguard Ultra Short Bond ETF (VUSB)

[photojoe_]

I logged onto Vanguard today and saw them post about a new ETF, Ultra Short Bond. On their site, it says it is for cash you think might be used in 6 to 18 months or to try to build your emergency fund.

https://investornews.vanguard/vanguard- ... hed-today/

https://investor.vanguard.com/etf/profile/VUSB


I have been thinking for awhile if there are possible ways I can use a portion of my Emergency Fund/savings for house down payment account into something to try to get a little bit better returns. Definitely not all of it, but a part of it. From Vanguard's description, at least, that sounds to fit that bill.


Anyone smarter than me that has thoughts on this when we don't have any historical data from it? Thanks

[dukeblue219]

None of these make any sense relative to "high yield" savings for average folks (for taxable accounts anyway) . If you have millions that you need to invest because youre out of the savings account limits then sure.

BSV has a yield less than half a percent and that should be higher than this one I'd imagine.

[whereskyle]

I logged onto Vanguard today and saw them post about a new ETF, Ultra Short Bond. On their site, it says it is for cash you think might be used in 6 to 18 months or to try to build your emergency fund.

https://investornews.vanguard/vanguard- ... hed-today/

https://investor.vanguard.com/etf/profile/VUSB


I have been thinking for awhile if there are possible ways I can use a portion of my Emergency Fund/savings for house down payment account into something to try to get a little bit better returns. Definitely not all of it, but a part of it. From Vanguard's description, at least, that sounds to fit that bill.


Anyone smarter than me that has thoughts on this when we don't have any historical data from it? Thanks

Because you do not know when the right house at the right price will appear, the money you will use to buy the house should be in a no-risk HYS account.

Happy hunting!

[photojoe_]

Because you do not know when the right house at the right price will appear, the money you will use to buy the house should be in a no-risk HYS account.

Happy hunting!

Sounds like it's not the right fit for me.

Thanks!

[gjlynch17]

Vanguard's Ultra Short Bond ETF (VUSB) is similar to Vanguard's Ultra Short Bond Fund (VUSFX). Unlike many of Vanguard's other ETFs, this is a stand-alone ETF and not a separate class of the mutual fund (not sure why but it could be because of the active nature of both VUSB and VUSFX). With that said, I believe both VUSB and VUSFX will be extremely similar in terms of risk profile and returns.

With a duration of approximately one year, this fund serves an interesting niche between money market funds and short-term bond funds. Some of its nearest competitors include BlackRock Ultra-Short Bond ETF (ICSH), BlackRock Short Maturity Bond ETF (NEAR) and JP Morgan Ultra-Short Bond ETF (JPST). I like VUSB better than than the latter two funds because of its lower expense ratio (0.10% for VUSB compared to 0.25% for NEAR And 0.18% for JPST). ICSH has a slightly lower expense ratio (0.08%) but a shorter duration (currently 0.42 years).

With that said, I am not sure any of these funds make sense in the current environment. One can deposit funds in a high yield savings account at 0.50% -- 0.65% with no volatility. If one is slightly adventurous, one can invest in Toyota Income Driver Notes at 1.50% with no volatility (albeit marginal credit risk).

viewtopic.php?f=1&t=340088

Things may change in the future but currently ultra-short bond funds seem unappealing.

[UpperNwGuy]

I wonder why Vanguard did not make the new ETF a share class of the existing mutual fund. Could this be a glimpse of where Vanguard hopes to go in the future with other funds?

[retiringwhen]

I wonder why Vanguard did not make the new ETF a share class of the existing mutual fund. Could this be a glimpse of where Vanguard hopes to go in the future with other funds?

I believe the primary driver is that this ETF and the original ultra-short mutual fund are actively managed. I am guessing that there may be practical and theoretical issues with arbitrage between the share classes that may undermine or make the dual share class model undesirable. Remember the disclosure requirement for the constituents in an active ETF are much less transparent with greater delays than an index ETF.

I actually love that Vanguard found a way to put a turd in the punch bowl for all the other brokerages that force folks to hold cash in terrible FDIC accounts to juice their revenue (Schwab comes to mind first). This fund is a real viable alternative for someone wanting to keep cash or near cash in their brokerage account, but they don't have viable alternatives provided by the brokerage. When rates to start to rise again, this funds will really begin to display the difference.

For example, my son values simplicity over stable cash value for his car fund, so instead of opening an Ally account, he saves for his next car in the mutual fund version at Vanguard. Someone at Schwab could do the same thing.

The other way to view this fund is the practical result of closing all those Prime Money Market funds, now you can get commercial paper returns with a small additional risk that is clear and up front instead of hidden in the old gates and redemption rules required by the SEC after the GFC mess. From this perspective, opening an ETF makes the fund much more broadly available to investors beyond the previous availability of money market funds.

I believe this is Vanguard's first Active ETF.

[ruud]

I believe this is Vanguard's first Active ETF.

What about the (well-hidden) Factor ETFs like VFMF, VFVA, etc.?

[retiringwhen]

I believe this is Vanguard's first Active ETF.

What about the (well-hidden) Factor ETFs like VFMF, VFVA, etc.?

The factor funds are technically Index ETFs as they provide composition files driven (PCF) in near real-time, see: https://investor.vanguard.com/etf/profi ... o/VFMF/pcf
But! VUSB provides one as well.
VUSB https://investor.vanguard.com/etf/profi ... o/VUSB/pcf

I think this is the standard quarterly holdings for VUSB:
VUSB https://investor.vanguard.com/etf/profi ... o-holdings
But VFMF we get near real-time holdings:
VFMF https://investor.vanguard.com/etf/profi ... o-holdings

Edited, as I put in the wrong URL first time. I also note that VUSB provides a PCF, so maybe I am wrong!

More background: There seems to be a distinction between transparent and semi-transparent Actively Managed ETFs in the SEC rules. I can't tell which type either VFMF or VUSB are categorized..... VUSB's prospectus does not specify as far as I can tell.

[ruud]

I believe this is Vanguard's first Active ETF.

What about the (well-hidden) Factor ETFs like VFMF, VFVA, etc.?

They are technically Index ETFs as they provide composition files in real-time.

Interesting, I learned something new today.

[ruralavalon]

I logged onto Vanguard today and saw them post about a new ETF, Ultra Short Bond. On their site, it says it is for cash you think might be used in 6 to 18 months or to try to build your emergency fund.

https://investornews.vanguard/vanguard- ... hed-today/

https://investor.vanguard.com/etf/profile/VUSB


I have been thinking for awhile if there are possible ways I can use a portion of my Emergency Fund/savings for house down payment account into something to try to get a little bit better returns. Definitely not all of it, but a part of it. From Vanguard's description, at least, that sounds to fit that bill.


Anyone smarter than me that has thoughts on this when we don't have any historical data from it? Thanks

This seems very similar to Vanguard Ultra-Short-Term Bond Fund Investor Shares (VUSFX) ER 0.20% SEC Yield = 0.43%, and Vanguard Ultra-Short-Term Bond Fund Admiral Shares (VUBFX) ER 0.10%, SEC Yield = 0.53%.

I think these funds are suitable savings vehicles for short-term goals, giving returns better than money market funds and similar to online savings accounts.

[Doc7]

Seems to me like a good application for i-bonds instead (for $10K or $20K of this), unless there is a >0% chance you would buy in less than 11 months, 3 weeks.

[retiringwhen]

Seems to me like a good application for i-bonds instead (for $10K or $20K of this), unless there is a >0% chance you would buy in less than 11 months, 3 weeks.

You have much better liquidity with VUSB than i-bonds with their 1 year holding period and somewhat cumbersome redemption process... i-bonds are great for medium to long-term holding periods. I can't see using them for a car or emergency fund.

[Lastrun]

This fund is a real viable alternative for someone wanting to keep cash or near cash in their brokerage account, but they don't have viable alternatives provided by the brokerage. When rates to start to rise again, this funds will really begin to display the difference.

Question, but have investors not had ICSH for the past decade? It behaves a lot like VUSFX. But i do like your point.

[anon_investor]

Seems to me like a good application for i-bonds instead (for $10K or $20K of this), unless there is a >0% chance you would buy in less than 11 months, 3 weeks.

You have much better liquidity with VUSB than i-bonds with their 1 year holding period and somewhat cumbersome redemption process... i-bonds are great for medium to long-term holding periods. I can't see using them for a car or emergency fund.

How is redeeming electric I Bonds cumbersome? Click some buttons and it ends up at your linked bank account in a couple of business days.

[retiringwhen]

This fund is a real viable alternative for someone wanting to keep cash or near cash in their brokerage account, but they don't have viable alternatives provided by the brokerage. When rates to start to rise again, this funds will really begin to display the difference.

Question, but have investors not had ICSH for the past decade? It behaves a lot like VUSFX. But i do like your point.

You are right, but it adds to the pressure. I think ICSH is even shorter duration too which makes it more money market like.

[retiringwhen]

Seems to me like a good application for i-bonds instead (for $10K or $20K of this), unless there is a >0% chance you would buy in less than 11 months, 3 weeks.

You have much better liquidity with VUSB than i-bonds with their 1 year holding period and somewhat cumbersome redemption process... i-bonds are great for medium to long-term holding periods. I can't see using them for a car or emergency fund.

How is redeeming electric I Bonds cumbersome? Click some buttons and it ends up at your linked bank account in a couple of business days.

I was thinking paper... never had a treasury direct account. Still have to hold for a year.

[nisiprius]

It would be a mistake to suppose that all "ultrashort" bond funds are similar, but Fidelity's Ultra-Short Bond Fund



was memorable. I don't understand how Fidelity's fund could possibly have done that, and therefore I don't understand why Vanguard's can't do the same thing. Clearly Fidelity's fund was holding something more complicated than very-short-term bonds.

The Vanguard Ultrashort Bond Fund has made a lot more money than a money market fund since inception...

Source



but I don't care much for that glitch in 2020, it seems like the sort of thing that should not happen in something you are treating like a cash substitute. We're talking about a drop of -1.5% in just two weeks. Yeah, only -1.5%, and it came right back up, but...