Vanguard today launched the least expensive international, non-U.S. equity ETF that is almost identical to another fund it already offers. That makes it part of the Valley Forge, Pa.-based company’s strategy to cater to brand loyalty among investors by offering complete families of similar products, each with its own set of indexes.

The launch of the Vanguard Total International Stock ETF (NYSEArca: VXUS), which comes at a time of heightened interest among U.S. investors in non-U.S. companies,  also brings Vanguard into direct competition with iShares, which offers an identical product to VXUS that uses the same index, the MSCI All Country World Index ex USA.

Vanguard’s VXUS has an annual expense ratio of 0.20 percent, less than both the 0.35 percent BlackRock charges on its iShares MSCI ACWI ex US Index Fund (NasdaqGM: ACWX) and the 0.25 percent cost of the Vanguard FTSE All World ex-U.S. ETF (NYSEArca: VEU).

Vanguard’s low costs are at the core of the company’s fast growth. It led ETF providers in net inflows in 2010, attracting about $40 billion in new investment dollars last year. Last week, its Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) became the world’s largest emerging markets fund, surpassing its BlackRock-sponsored counterpart, the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM). VWO costs 0.27 percent, while EEM costs 0.69 percent.

The new ETF is designed to be a separate share class of Vanguard’s Total International Stock Index Fund, the company’s second-largest international index fund, with $51.4 billion in net assets.

“VXUS is a new way to invest in an established fund that offers broad international diversification with an extremely modest price tag,” Vanguard’s Chief Investment Officer Gus Sauter said in a press release. “It complements our Total Stock Market ETF and Total Bond Market ETF.”

VXUS Vs. VEU

VXUS tracks the MSCI All Country World ex U.S. Investable Market Index, a benchmark comprising more than 6,000 securities in 44 countries of companies in all tiers of market capitalization, the company added in the release.

VEU, an ETF with $6.95 billion in assets as of Jan. 27, was launched in March 2007 and tracks the FTSE All-World ex US Index, an index similar in construction to the MSCI benchmark behind VXUS, but that has a smaller portfolio and excludes small caps.

VXUS has more than 43 percent of its portfolio allocated to Europe, and some 25 percent of the portfolio tied to emerging markets and to Pacific nations, respectively.

The remainder is allocated to North America, namely Canada. VEU’s allocation distribution is roughly the same, according to Vanguard’s most recent data on its website. All in all, the new fund covers 98 percent of the world’s markets, excluding the U.S.

Vanguard’s Growing Reputation

Vanguard has also emerged as a top pick among investors and advisors alike, according to different surveys conducted by Cambridge, Mass.-based business consultancy Cogent Research in recent months in a trend the company concluded reflects investors’ growing recognition of Vanguard’s value proposition.

Vanguard has nearly $150 billion of assets under management in its ETFs. It’s the third largest ETF sponsor in the world, behind BlackRock and State Street Global Advisors, which have around $448 billion and $247 billion in assets, respectively, according to data compiled by IndexUniverse.com.