Vanguard has filed initial papers with the Securities and Exchange Commission (SEC) for the right to launch an actively managed fixed-income exchange-traded fund (ETF). The new ETF will be a separate share class of the actively managed Vanguard Inflation-Protected Securities Fund (ticker: VIPSX).

Kenneth Volpert, co-manager of the fund, told Dow Jones reporter Ian Salisbury that Vanguard decided to file the ETF because it wanted to expand its fixed-income ETF line-up into Treasury Inflation-Protected Securities, or TIPS. The active component is a fallout of the fact that Vanguard does not offer a TIPS index fund. All Vanguard ETFs are structured as separate share classes of existing funds, so an active ETF was really the only possibility in this space.

The Vanguard TIPS fund is the second actively-managed fixed-income ETF to be submitted to regulators recently. In March, Bear Stearns filed a full prospectus for what could be the first actively-managed ETF ever: the Bear Stearns Current Yield Fund (tentative ticker, AMEX: YYY). The new, money-market-like fund would use active strategies in an attempt to outperform a traditional money market account.

The new Vanguard TIPS ETF, if approved, will compete with the iShares Lehman TIPS Bond ETF (NYSE: TIP). The two offer substantially similar exposure, in part because they draw from a limited universe of possibilities: there are currently exactly 21 TIPS securities in existence.

The Lehman TIPS index includes all 21 of those securities, weighted by market capitalization. That creates a fund with an effective maturity of 6.08 years and a 30-day yield of 2.05 percent. The Vanguard fund, with its active overlay, yields 2.02 percent and has an effective maturity of 6.7 years.

Some people believe that the focused nature of the TIPS market gives active funds an edge.

"We use the Vanguard TIPS fund over the iShares Lehman TIPS ETF," said Rick Ferri, founder and CEO of Portfolio Solutions. "The Vangurd TIPS structure is a better 'index' than the Lehman TIPS index. The Treasury did not have index fund investor's goals in mind when they issued new TIPS. From an investor's view, there is no rhyme or reason to the issues outstanding."

Some argue that small portfolio tweaks and smoother trading structures can add performance value over the index. Still, there is no wild, wild West going on here: the Vanguard fund has historically tracked the Lehman bond index very closely.

IndexUniverse.com will have more details on this fund in the coming days.