Vanguard is the second largest U.S. issuer of exchange-traded funds (ETFs). Aside from that heft, the company is also known for being one of the low-cost leaders in the ETF and index fund arenas. That reputation is alive and well with firm's newest ETF, the Vanguard Total Corporate Bond ETF (VTC).

The Vanguard Total Corporate Bond ETF, which debuted last week, has an annual expense ratio of just 0.07%, or $7 on a $10,000 investment. That is less than half the annual fee on the largest corporate bond ETF on the market, and it makes VTC cheaper than 91% of competing funds, according to issuer data.

VTC uses an ETF of ETFs structure, meaning that its holdings are Vanguard's other three corporate bond ETFs – the Vanguard Short-Term Corporate Bond ETF (VCSH), Vanguard Intermediate-Term Corporate Bond ETF (VCIT) and Vanguard Long-Term Corporate Bond ETF (VCLT). (See also: An Introduction to Corporate Bond ETFs.)

Owing to the mix of of short-term and long-term debt found by combining VCSH, VCIT and VCLT, the new VTC qualifies as an intermediate-term fund and is considered to have an intermediate-duration portfolio. Duration measures a bond's sensitivity to changes in interest rates. The average 30-day SEC yield on VCSH, VCIT and VCLT is just under 3.2%.

"The ETF of ETFs structure enables the fund to immediately access more than 5,500 U.S. corporate bonds by taking advantage of the existing exposure and scale offered by the underlying ETFs," according to Vanguard. "This approach achieves near complete replication of the benchmark at the fund’s inception as well as tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark's constituents."

With yields still low on developed markets sovereign debt, fixed income investors have been flocking to corporate bond ETFs this year. Two such ETFs, including the aforementioned VCIT, are among this year's top 10 asset-gathering ETFs. VCIT has seen 2017 inflows of $7.37 billion, a total surpassed by just two other bond funds and nine ETFs overall.

Each of the three Vanguard ETFs that serve as the new VTC's holdings are investment-grade funds, so credit risk is not an issue for prospective investors. For example, about 81% of VCIT's holdings are rated A or Baa, while nearly 89% of VCLT's roster is rated A or Baa. VTC is the only new ETF launched by Vanguard this year and the first new ETF introduced by the Pennsylvania-based index fund giant in over a year and a half. (For more, see: Guide to ETF Providers: Vanguard.)

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