Reinforce US equity breadth with small- and mid-cap ETFs

• Amid concentrated US equity markets, the challenge is not whether to hold the dominant companies, but how to complement them.
  
  
• Moving beyond large-cap indices to access mid- and small-cap segments can broaden US equity exposure and reduce concentration risk.
  
  
• A consistent Russell index framework supports modular, low-cost portfolio construction across market-capitalisation dimensions.

Concentration in US equity markets has become a defining feature in recent years. The challenge for investors is not whether to hold these dominant companies, but how to complement them by accessing the broader opportunity set across the market.

Exposure to US equities still relies heavily on large-cap benchmarks. While these remain core building blocks, they capture only part of the investable universe, which extends into mid-sized companies and a long tail of smaller firms.

Against this backdrop, the case for more granular exposure has strengthened. Our new ETFs aim to enable more precise and flexible portfolio construction across the US equity spectrum. 

A more complete picture of US equities

The new ETFs span two distinct exposures – small-caps and mid-caps – with each aligned to a specific segment of the Russell index framework:

• Vanguard Russell 2000 US Small-Cap UCITS ETF

• Vanguard Russell US Mid-Cap UCITS ETF

The US equity market can be broken down into complementary components that behave differently and serve distinct roles in a portfolio. The Russell 2000 Index focuses on smaller companies, offering exposure to stocks that are often more domestically oriented and sensitive to economic cycles. 

The Russell Mid Cap Index sits between large- and small-caps, acting as a “completion” exposure that helps reduce reliance on mega-caps. This segment provides a more balanced profile, combining elements of both growth and value while reducing reliance on the largest companies.

Taken together, these exposures offer new building blocks. Investors can use them to construct more tailored US equity allocations – for example, complementing an existing large-cap core exposure by diversifying into smaller companies.

Addressing concentration risk through a modular approach

One of the most compelling use cases for combining size exposures is managing concentration risk. And rather than viewing these exposures in isolation, their real power lies in combination. A modular approach allows portfolios to be tailored based on objectives:

• Mid-caps dilute the influence of mega-caps while retaining exposure to established companies. They can be used as a completion exposure between large and small companies.

• Small-caps offer broad diversification across hundreds of companies, providing access to domestic growth and diversification.

These building blocks can help portfolio constructors restore breadth to US equity allocations – moving from a concentrated core to a more diversified structure.

Cost, implementation and portfolio implications

Low-cost implementation remains central to the investment case. Our new ETFs are competitively priced, and given the liquidity of US equities, trading costs are typically low – supporting both entry and switching.

This enables investors to refine their US equity exposure without materially increasing costs. As a result, portfolios can move beyond concentrated large-cap allocations towards a more balanced mix across market capitalisations.

The shift towards more targeted exposures reflects a broader evolution in portfolio construction: from broad benchmarks to more precise, modular allocations. In this context, having the right building blocks matters.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Investments in smaller companies may be more volatile than investments in well-established blue chip companies.

ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid-offer spread which should be considered fully before investing.

The Funds may use derivatives in order to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Fund's net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.

Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.

For further information on risks please see the “Risk Factors” section of the prospectus on our website.

Important information

This is a marketing communication.

This is directed at professional investors and should not be distributed to, or relied upon by retail investors.

For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KID before making any final investment decisions. The KID for this fund is available in local languages, alongside the prospectus, which is available in English only, via Vanguard’s website. 

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.

Potential investors will not benefit from the protection of the FinSA on assessing appropriateness and suitability.

The Manager of Vanguard Funds plc is Vanguard Group (Ireland) Limited. Vanguard Investments Switzerland GmbH is a financial services provider, providing services in the form of purchase and sales according to Art. 3 (c)(1) FinSA. Vanguard Investments Switzerland GmbH will not perform any appropriateness or suitability assessment. Furthermore, Vanguard Investments Switzerland GmbH does not provide any services in the form of advice. Vanguard Funds plc has been authorised by the Central Bank of Ireland as a UCITS. Prospective investors are referred to the Funds' prospectus for further information. Prospective investors are also urged to consult their own professional advisors on the implications of making an investment in, and holding or disposing shares of the Funds and the receipt of distributions with respect to such shares under the law of the countries in which they are liable to taxation.

Vanguard Funds plc has been approved for offer in Switzerland by the Swiss Financial Market Supervisory Authority. The information provided herein does not constitute an offer of Vanguard Funds plc in Switzerland pursuant to FinSA and its implementing ordinance. This is solely an advertisement pursuant to FinSA and its implementing ordinance for Vanguard Funds plc. The Representative and the Paying Agent in Switzerland is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich. Copies of the Articles of Incorporation, KID, Prospectus, Declaration of Trust, By-Laws, Annual Report and Semiannual Report for these funds can be obtained free of charge from the Swiss Representative or from Vanguard Investments Switzerland GmbH via our website.

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