Vanguard expects to roll out a low-cost commodities-focused mutual fund in June, the company announced on Thursday.
The asset manager has filed a preliminary registration statement with the Securities and Exchange Commission for the Vanguard Commodity Strategy Fund, an actively managed product the company says will aim to beat the Bloomberg Commodity Total Return Index by investing in commodity-linked derivative instruments that create long and short exposures to commodities. That includes commodity futures and swaps, as well as commodity-linked structured notes and exchange-traded commodity pools or funds.
In its filing, Vanguard said it expects the use of certain commodity-linked investments to have a leveraging effect on the fund.
In addition, the fund will invest in investment-grade Treasury bills and short-term treasury inflation protected securities (TIPS). Vanguard is positioning this product as a tool for portfolio diversification and a potential hedge against inflation.
And the company is touting the product’s low cost: the fund will solely offer Admiral Shares at a $50,000 investment minimum, with an estimated expense ratio of 0.20 percent. Citing Morningstar data, Vanguard says this fee will be less than one-sixth the average expense ratio of rival broad-based commodity-linked funds.
Vanguard’s Quantitative Equity and Fixed Income Groups will be the advisors for the Vanguard Commodity Strategy Fund. The former has managed the Vanguard Managed Payout Fund’s commodity strategy for more than 10 years. When the proposed commodities fund launches in June, the $135 million in commodities exposure within the $1.8 billion Vanguard Managed Payout Fund will reallocate into the new fund.