Vanguard's Most Curious -- and Most Promising -- ETF Launch of 2025

Core Viewpoint - Vanguard is entering the high-yield bond market with its new actively managed ETF, the Vanguard High-Yield Active ETF, which represents a significant shift from its traditional focus on investment-grade bonds [4][5]. Company Developments - In December 2025, Vanguard announced a policy change allowing crypto trading on its platform, marking a departure from its previous stance against cryptocurrencies [2][3]. - The Vanguard High-Yield Active ETF was launched in September 2025, indicating a new direction for the company in the junk bond space [4]. Fund Strategy and Management - The Vanguard High-Yield Active ETF aims to invest in a diversified portfolio of junk bonds, focusing on security selection, sector allocation, and market analysis to outperform the high-yield market [5]. - This ETF is actively managed, contrasting with the majority of Vanguard's ETFs, which are passively managed [6]. - The fund has a competitive expense ratio of 0.22%, significantly lower than the average of 0.59% for similar funds, which could enhance shareholder returns [7][12]. Portfolio Composition - The ETF's current asset allocation includes approximately 48% in BB-rated bonds, 36% in B-rated bonds, and about 9% in bonds rated CCC or worse, with 8% in Treasuries for liquidity [7][9]. Future Outlook - Active management is seen as crucial in the evolving junk bond market, allowing the fund to adapt to changing market conditions [11]. - Vanguard's management team aims for an annual outperformance target of 40 basis points relative to a broad high-yield bond index, supported by a well-resourced team with over 200 investment professionals and more than $2.6 trillion under management [12].