Industry Updates

Vanguard to offer cheapest short-duration US Treasury bond ETF after fee trim

OCF will drop two basis points

Lauren Gibbons


Vanguard has trimmed the fee of its short-duration US Treasury bond ETF to offer the cheapest in the market.

The $636m Vanguard U.S. Treasury 0-1 Year Bond UCITS ETF (VDST) will see its ongoing charges figure (OCF) cut by two basis points across both US dollar and Mexican pesos hedged share classes.

The US dollar share class has an OCF of 0.05%, the cheapest across all short-duration US Treasury ETFs in Europe, while the Mexican pesos share class has a 0.10% fee.

A spokesperson from Vanguard said: “VDST was launched in September 2020 and is primarily for and largely held by Mexico investors.

“The ETF primarily meets Mexico investors’ needs to diversify a portion of their local fixed income exposure towards international short duration investments. Following a review of the OCF for this ETF, it was determined that the reduction is appropriate.”

The cut makes VDST more competitive against two rival products, the iShares Treasury Bond 0-1yr UCITS ETF (IB01) and the Invesco US Treasury Bond 0-1 Year UCITS ETF (TREI) which carry total expense ratios (TERs) of 0.07% and 0.06%, respectively.

The US giant saw a series of fee cuts in 2019 but has not participated in the recent intensifying price war that has seen a number of larger ETF issuers enter a race to the bottom in Europe.

Despite a regular cadence of fee cuts over the last year, Q1 data revealed that BlackRock's S&P 500 ETF eclipsed its State Street Global Advisors (SSGA) rival in inflows despite the latter's aggressive fee reduction in Q4 last year.

BlackRock’s product saw $4.7bn net new assets while SSGA’s amassed $3.4bn inflows during the quarter.

Featured in this article

Logo for Vanguard