Vanguard Plans First Commodities Fund

Vanguard plans to launch its first commodities fund in June.

The actively managed Vanguard Commodity Strategy is intended as “a low-cost, broad-based option for advisors and institutional investors seeking additional diversification and inflation protection for a well-balanced portfolio,” said Matt Brancato, head of Vanguard’s portfolio review department, in a statement.

The fund will offer only Admiral shares, at a minimum $50,000 investment, and have an estimated 20 basis-point expense ratio, far below the 1.25% average for actively managed commodity mutual funds (or 0.92% median for their institutional shares), according to Morningstar data.

The new fund will invest in commodity-linked derivative investments such as commodity futures and swaps, collateralized by a mix of Treasury bills and short-term Treasury inflation-protected securities (TIPS), and it will seek to outperform the Bloomberg Commodity Total Return Index.

Vanguard’s Quantitative Equity and Fixed Income Groups will serve as the fund’s advisors. The quantitative equity team already manages the commodity strategy of the Vanguard Payout Fund, which will reallocate its commodities allocation to the new fund.

In an April 2018 commentary on its website, Vanguard said “commodities can be a sensible part of a diversified investment strategy — particularly for sophisticated investors — but their complexity and costs are stumbling blocks to wider use.”