Vanguard dishes deliverables far faster under new CEO but its press on latest ETF launch drew real analyst double-take

The Vanguard Group was already cranking out deliverables far faster under its new CEO's control, but its ETF news this week had something more – a hint of controlled aggression.

The Malvern, Pa., asset management giant just filed to launch three new, active ETFs – two near clones of existing mutual funds. The Securities and Exchange Commission (SEC) is likely to approve Vanguard's ETF classes of existing mutual funds, analysts say.

It's seeking two "standalone" active ETFs, rather than stand pat and wait for regulators to approve ETF versions of two popular mutual funds.

“Vanguard isn’t waiting around for SEC approval to launch dual mutual-fund ETF share classes—a sign that the fund giant is moving faster under new(ish) CEO Salim Ramji than before,” writes Jeff DeMaso, editor of the Independent Vanguard Adviser (IVA), in an email.

Vanguard – likened as much to The Vatican as its financial super-peers – has launched more ETFs (14) during Ramji's first 12 months in the hotseat than it has in any given year since 2010.

Vanguard declined to comment on why it has opted to push ahead with a quick launch. It also declined to answer if it intends to launch more funds this year.

Sense of urgency

But its Aug. 18 filing for three new ETFs makes 2025 its second most active year for launches since the turn of the millennium, according to IVA data.

Indeed, Vanguard launched just one ETF in 2020, five in 2021, three in 2022, and four in 2023 and 2024. – with plenty of room for new ones:

Compare that to Vanguard under Ramji's first 12 months; it has launched more ETFs (14)  than it has since 2010 [18],

Ramji, who spent 16 years at McKinsey, expressed his sense of urgency in a Morningstar interview this summer – both generally and specifically.

“There’s a lot of opportunity ... [and] so many more things we can do ... in fixed-income, in helping people save ... [and] being able to provide advice in a much more accessible way," he explained.

Ramji's mention of fixed income is notable based on an analysis by Morningstar senior manager research analyst Daniel Sotiroff.

“Most of the ETFs launched in the past year were likely under development before Ramji started," he explains, in an email exchange. 

"Most of them are fixed-income ETFs, and that was a priority under [ex-CEO] Tim Buckley, Ramji's predecessor.”

Signficant evolution

In a recent Morningstar interview, Ramji stated that Vanguard was no longer a technology laggard, and that, after three years of “costly” spending, the company is now 90% “on the cloud,” and “turning a corner.”  See: Salim Ramji says Vanguard 'turned the corner' on tech woes.

"It's a significant evolution, but not a culture-shifting revolution," adds Andrew Besheer, principal of Albany, N.Y. consultancy, Besheer & Associates, in an email.

“Ramji is seeing to the execution of plans launched several years before he arrived, and [he] is maybe adding his own touches to them," Besheer explains.

Yet, speed itself can yield dividends, according to a report from McKinsey partners Louisa Greco and Zachary Silverman.

Innovator's dilemma

“Transformations are tough to pull off ... [and] companies have to get several elements right,…  [but] one factor, in particular, stands out: speed,” they write.

“Companies have to see value land quickly … Three actions are crucial: preparing for a rapid execution at the start, maintaining momentum beyond the initial launch, and embedding the transformation’s operational infrastructure into business as usual, so the changes stick,” they add.

There's a more specific way to look at ‘transforming' business-as-usual, DeMaso says.

“The innovator's dilemma is a decent, but not perfect lens for viewing Vanguard," he adds.

"Bogle's innovation was the index fund. It changed the world of investing and made Vanguard, he says.

Now, decades later, “Vanguard is top of the [indexing] game, with BlackRock, and indexing has ‘won’ the day … [so] we're all left asking, 'What's next?' 

"I think it's fair to say Ramji is asking the same question,” DeMaso continues.

Goin' active

Vanguard expects to launch its three new ETFs in November, anticipating 75 days between its initial filing and launch.

The launch will lift the number of actively managed Vanguard ETFs to 17, or just under a fifth of the firm's overall ETF count.

Of the three funds, two – the Wellington Dividend Growth Active ETF (VDIG), and the Wellington U.S. Value Active ETF (VUSV) – will mirror existing mutual funds, namely Vanguard's $46 billion Dividend Growth fund, and its $23 billion Windsor Fund, according to DeMaso.

The third, the Wellington US Growth Active ETF (VUSG) merely "nods" to Vanguard's US Growth mutual fund. It will run under two new managers, who run the firm's Global Equity mutual fund, DeMaso explained in a recent article.

The new ETFs are Vanguard's first active stock-picking ETFs – its other 14 active ETFs use a set investing schema – and, with fees of 0.4%, 0.3%, and 0.35%, respectively, they are its most expensive*, too, although they still levy fees 38 basis points lower than the industry average of 0.76%, according to company data.

Launching them as separate going concerns to the firm's existing mutual funds may also stave off potential tax issues for investors, given unrealized capital gains, and it gives Vanguard the benefit of a clean slate, according to DeMaso.

"They’re thinking about this strategically in the interests of their investors and not taking the easy route of just cloning the existing, and adding a new share class," says Besheer.

"There’s probably ways of running [dividend growth] actively that more than make up – in potential tax savings – for the difference in fees to the existing [mutual] fund.

"I like the idea of bringing in active managers who may have a different perspective," he adds.

The Wellington factor

The fact that Vanguard has opted to use Wellington Management Company's name on the three funds -- it's a sub-advisor – is notable, not least because it is the first time the two companies have collaborated on an ETF.

“Wellington is the ideal initial partner for our active equity ETF platform ... These three ETFs reflect Wellington Management’s century-long success ... and it's more than 50-year history as a sub-advisor to Vanguard mutual funds,” says a Vanguard spokesperson.

The ETFs “bring together the best of Vanguard ... and Wellington’s expertise in fundamental active management. The portfolio management teams and strategies ... are held in high regard by Vanguard and similar to strategies offered in some of our flagship mutual funds,” the spokesperson adds.

Real commitment

DeMaso says Vanguard's use of Wellington's name indicates the growing power and influence of Wellington, which manages $1.3 trillion, today.

“'Wellington' in the name [is] a real commitment … if Vanguard changes managers down the road, will they have to rename the fund?” he asks.

“It’s possible both sides think having Wellington in the name will be better for business, [and] generate more [active] flows ... 

"Or it could reflect a compromise between the two firms: Vanguard wanted to launch active ETFs, and Wellington only agreed if they had their name on the label.”

Stretching borders

“Vanguard, and its competitors, are responding to an overall change in the investment landscape. ETFs are taking in a lot of money while mutual funds are losing a lot of money. That's the main motivation,” DeMaso says. 

Defending what it has by stretching its borders is clearly a motivation, he adds. 

"The puck is moving in that direction, so Vanguard is, too … [which is] more about defending its share, keeping up with peers, and searching for incremental growth as opposed to pursuing a truly innovative idea..

“The ETF structure will help active managers compete with index funds, but it's not a game-changer … active ETFs aren't ‘it.'

“But, let's acknowledge that coming up with something as transformational as the index fund is going to be hard, to say the least,” he says..

For the truly “transformational,” Ramji may be waiting for his biggest hire to date, Joanna Rotenberg, to unveil her wealth management plan as head of retail. See: Vanguard completes shakeup with outsiders Salim Ramji, Joanna Rotenberg supplanting firm lifers Tim Buckley, Karin Risi as RIA takes center stage

* In the last 25 years, Vanguard has never launched more ETFs per year than BlackRock. In 2003, the two firms both launched six.

* Prior to the three active launches, Vanguard’s Multi-Sector Income Bond ETF stood out as the firm's costliest, with an expense ratio of 0.3%.