Cheap, Clean, and Unproven: A Closer Look at Vanguard’s First Active Stock ETFs

Vanguard’s first actively managed, human-run stock ETFs began trading today—and on paper, they check a lot of boxes. Cleaner, more tax-efficient wrappers? Absolutely. Low fees? Yes…but not as low as we initially thought. But none of that answers the fundamental question: Are these strategies worth owning?

Last week, my Quick Takes—here and here—gave you the short answer: Not yet. (Why two articles? Because Vanguard flubbed an SEC filing!)

Today, let’s dig into the research behind that conclusion so you can judge for yourself.

The Lay of the Land

To get us started, here’s how these new ETFs fit into Vanguard’s lineup:

Wellington Dividend Growth Active ETF (VDIG) is essentially a “copy-and-paste” of Dividend Growth (VDIGX). Peter Fisher is running this ETF using the same playbook of buying companies that pay larger and larger dividends—same strategy, new wrapper.

Wellington U.S. Value Active ETF (VUSV) doesn’t have an obvious mutual-fund twin after Vanguard merged its U.S. Value mutual fund into Value Index (VVIAX) in 2021. But with David Palmer calling the shots, the new ETF is essentially Windsor (VWNDX) minus the mutual fund’s 30% sleeve run by deep-value shop Pzena Investment Management.

Wellington U.S. Growth Active ETF (VUSG) is where things may get confusing. Despite the label, this is not a clone of U.S. Growth (VUSGX), the mutual fund. Instead of Andrew Shilling and Clark Shields (who run Wellington’s sleeve of U.S. Growth), the ETF is led by Brian Barbetta and Michael Masdea—the pair who manage a piece of Global Equity (VHGEX). Different managers and approaches mean a totally different animal in an ETF wrapper.

Before turning to performance, let’s talk fees.

Competitive, Not Industry-Shaking Fees

For a brief moment, it looked like Vanguard was coming out guns blazing on price. The firm’s November 13 SEC filing listed expense ratios ranging between 0.13% to 0.17%—shockingly low for actively managed ETFs. Too low, as it turns out. Vanguard later said those rock-bottom figures were the product of “human error.” (I spotted the mistake first.)

Unfortunately, the story shifts from Vanguard flexing its cost-cutting muscle to the flub itself. But let’s keep our focus on the ETFs.

Instead of those headline-grabbing sub-0.20% fees, the new ETFs charge between 0.30% and 0.40%. That makes them Vanguard’s priciest ETFs. But does that make them expensive? It depends on your comparison set.

In the context of active management—which has always carried higher costs than indexing—fees in the 0.30%–0.40% range are competitive. In fact, they’re at the low end of the industry’s most popular active stock ETFs:

• Ark Innovation ETF (ARKK):  0.75%
• Fidelity Magellan ETF (FMAG): 0.59%
• T. Rowe Price Blue Chip Growth ETF (TCHP): 0.57%
• JPMorgan Equity Premium Income ETF (JEPI): 0.35%
• Capital Group Dividend Value ETF (CGDV): 0.33%

Here’s how the new ETFs compare to their in-house mutual fund counterparts:

ETFs Aren't Always Cheaper

Here’s what stands out to me:

1. The ETF structure doesn’t guarantee the lowest fees. Despite common perception, simply slapping “ETF” on the label doesn’t make it the cheapest option.
2. Vanguard has real competition in active ETFs. In mutual funds, Vanguard sets the pricing bar. In ETFs, it’s playing in a much more crowded, fee-sensitive arena.

So, ignore the breathless headlines. Vanguard hasn’t “lost the script” on costs. If Vanguard is going to expand its actively managed ETF lineup—and it is—those funds will carry higher expense ratios than their index siblings.

With that out of the way, let’s dig into what each of the new ETFs actually brings to the table.