Vanguard, a prominent player in asset management, notably popularized the concept of indexing in the 1970s and has maintained its leadership in passive management ever since. Recently, the firm has experienced rapid growth, particularly driven by its exchange-traded funds (ETFs). Notably, in the last quarter of 2025, Vanguard recorded the highest inflows into ETFs, according to research from Motley Fool.
Traditionally favored for its low-fee, index-based ETFs, Vanguard has expanded its offerings in recent years by introducing more actively managed funds. This strategic move appears to be a response to changing market dynamics, where passive index strategies may struggle to deliver double-digit returns. In such environments, actively managed ETFs present an opportunity for portfolio adjustments in response to market fluctuations.
Among its newer actively managed offerings, the Vanguard U.S. Momentum Factor ETF has distinguished itself, showing resilience even as leading market indexes trend downward. While major benchmarks are in negative territory, the Vanguard U.S. Momentum Factor ETF has posted positive returns, making it an appealing option for investors seeking stability.
Managed by Vanguard’s Quantitative Equity Group under the leadership of Scott Rodemer, the Vanguard U.S. Momentum Factor ETF employs a rules-based quantitative model. This model selects stocks from various market caps that have outperformed their benchmarks over both a 12-month and a 6-month period, deliberately excluding the most recent month to mitigate short-term volatility. This approach aims to identify stocks that have demonstrated strong performance in anticipation of continued momentum.
As it stands, the ETF comprises 693 stocks, with notable holdings including Lam Research, GE Vernova, and Micron Technology. The ETF has delivered a year-to-date increase of 3.4% and an impressive 27% return over the past year. In comparison, the S&P 500 has declined by 3.9% year to date and registered a 16% increase over the last twelve months. Similarly, the Russell 3000 benchmark has seen a year-to-date drop of 3.3% but a 16.2% rise over the same period.
Over the past three years, the Vanguard U.S. Momentum Factor ETF has also outperformed these benchmarks, achieving an average annualized return of 22.6%. However, its five-year annualized return of 9.4% falls slightly short of both benchmarks.
In today’s unpredictable market climate, the Vanguard U.S. Momentum Factor ETF stands out as an advantageous choice for investors looking for positive returns amidst prevailing negative trends. While it may not outperform during bullish market phases, its strategic focus on top-performing stocks across market caps positions it as a valuable asset for those navigating challenging financial landscapes.
