Alternative investments like private equity, real estate, and commodities are increasingly being accessed by retail investors through ETFs. Vanguard entered the ETF market relatively late but has seen strong inflows into its alternative investment ETF offerings, which provide exposure to areas like REITs, commodities, and factor investing. The low-cost structure of ETFs makes alternatives more accessible.
Vanguard Saw Record ETF Inflows in 2021 Driven by Core Index Funds
Vanguard’s ETF inflows set records in 2021, reaching over $300 billion. The majority went into core equity and fixed income index ETFs, which make up the bulk of Vanguard’s ETF assets. However, flows into Vanguard’s alternative investment ETFs grew rapidly as well.
Alternatives Represent a Small but Growing Part of Vanguard’s ETF Lineup
While most of Vanguard’s ETF assets are in vanilla index funds, its alternative offerings including commodities, REITs, and factor-based strategies accounted for over $125 billion in AUM in 2021, making Vanguard a top 10 alternative ETF provider.
Expect Expanded Alternative Investment Options from Vanguard
Given the strong inflows and investor demand, Vanguard is likely to continue expanding its alternative ETF lineup. Areas of potential growth include private equity, managed futures, and more esoteric indexing strategies.
Vanguard established its reputation on low-cost index investing but has increasingly embraced alternative ETFs to meet investor demand for diversification and higher returns. Areas like commodities, REITs, and liquid alts are likely to see expanded offerings.