Filling the Gaps: Vanguard Adds Long-Term and NY Municipal Bond ETFs

Vanguard is filling the gaps in its municipal bond ETF lineup.

Today, the fund giant filed with the SEC to launch two new municipal bond ETFs:  Long-Term Tax-Exempt Bond ETF (VTEL) and New York Tax-Exempt Bond ETF (MUNY). The new funds won’t turn heads but are practical offerings that plug two holes in the lineup.

Two years ago, Vanguard only managed a single municipal bond ETF, Tax-Exempt Bond ETF (VTEB). Since then, Vanguard has launched five tax-exempt bond ETFs:

• The index-based Short-Term Tax-Exempt Bond ETF (VTES) was introduced in March 2023.
• In January 2024, index-based Intermediate-Term Tax-Exempt Bond ETF (VTEI) and California Tax-Exempt Bond ETF (VTEC) were launched.
• The firm’s first actively managed municipal bond ETFs—Short Duration Tax-Exempt Bond ETF (VSDM) and Core Tax-Exempt Bond ETF (VCRM)—launched in November 2024.

The new ETFs, due out in May (75 days from now), will aim to track indexes (they are not actively managed) and are expected to charge 0.09% in expenses.

While the new ETFs are cheap in the grand scheme of the investment world, they aren’t a better deal than their in-house competition. Most shareholders of Long-Term Tax-Exempt and New York Long-Term Tax-Exempt—Vanguard’s legacy actively managed mutual funds—own the Admiral shares (with a $50,000 minimum investment), which charge the same 0.09% in expenses.

ETF's Aren't Automatically Cheaper

So, if you are willing to own a mutual fund (over an ETF), you can get Vanguard’s active management for free! That’s a good deal in my book.