Vanguard has announced it will shut down its US dollar-denominated ESG corporate bond ETF, citing insufficient assets under management (AUM) to justify continued operation. The Vanguard ESG USD Corporate Bond UCITS ETF (V3SU) will be officially liquidated on 23 October.
In a statement to shareholders, Vanguard noted that the fund had not achieved the anticipated level of AUM and was “not covering its proportion of fixed costs of [Vanguard Funds].” As of now, V3SU holds approximately $17.4 million in assets.
A Vanguard spokesperson said: “While closing a fund is never an easy decision, we believe this step is in the best interests of our clients. It allows us to focus on products that are better positioned to achieve economies of scale and deliver long-term value for investors. This decision does not affect our broader ESG fund range, which is designed to help investors meet their financial goals while aligning with their ESG preferences.”
Launched to track the Bloomberg MSCI Corporate Float-Adjusted Liquid Bond Screened index, V3SU offers exposure to US dollar-denominated corporate bonds with strong ESG ratings. The fund excludes issuers involved in fossil fuels, nuclear energy, vice products, controversial weapons, and those failing to meet UN Global Compact principles.
Its euro-denominated counterpart, the Vanguard ESG EUR Corporate Bond UCITS ETF (V3RF), currently holds a more substantial $176.9 million in AUM.
This is not Vanguard’s first closure of European-listed ETFs due to limited investor interest. In 2020, the firm withdrew its four-strong active factor ETF range after it gathered $366.7 million collectively.
Earlier in 2024, Vanguard also revised the sustainability criteria for its five-strong ESG screened equity ETF suite— including the $951 million Vanguard ESG Global All Cap UCITS ETF (V3AB)—to align with updated naming guidelines issued by the European Securities and Markets Authority (ESMA).
The closure underscores the challenges in building scale for ESG fixed income strategies, particularly in a crowded and cost-sensitive European ETF market.
