Vanguard's VIPERs will initially be available for about $120 a share, plus the cost of paying a brokerage to purchase the shares, Vanguard spokesman John Woerth said.
Vanguard's own management fees for the shares total 0.15 percent of share value per year, lower than those of major mutual funds. Vanguard is the nation's second-largest mutual fund management company after Boston's Fidelity Investments.
Until last year, Vanguard had resisted offering exchange-traded funds. Vanguard founder John C. Bogle and other officials complained that fund-style shares encouraged short-term trading - while Vanguard emphasizes long-term investments.
But under the current chairman and chief executive officer, John Brennan, "Vanguard is much more marketing-oriented," said Daniel Wiener, publisher of the Independent Adviser for Vanguard Investors newsletter. "It's clear there's a market to be had there. If it has to do with indexing, Vanguard has to be there."
Even potential VIPER investors will be warned "that short-term trading activity is rarely successful and carries potential tax consequences," Woerth said.
But pension plans and wealthy investors have embraced exchange-traded funds. Investors now hold more than $70 billion worth of exchange-traded funds, managed by institutional investors such as Barclays P.L.C. (in partnership with Oaks-based SEI Investment Corp.) and State Street Corp., of Boston.
That is up from less than $10 billion three years ago, according to the Washington-based Investment Company Institute.
Responding to investor demand, Vanguard has decided to offer the funds as "a new distribution channel," Woerth said.
Vanguard also hopes to roll out exchange-traded funds based on other benchmarks. Offering an exchange-traded fund based on its largest mutual fund, which tracks the Standard & Poor's 500 index, has been delayed pending the outcome of litigation with S&P's owner, McGraw-Hill Cos.
Joseph N. DiStefano can be reached at jdistefano@phillynews.com.
