Vanguard has launched the actively managed Vanguard Core-Plus Bond Fund, which seeks to offer clients a broadly diversified, single-fund, core fixed income portfolio invested primarily in US Treasury, mortgage-backed, and other US investment-grade securities.
In addition, the fund may invest beyond the US investment-grade bond market in areas such as high-yield corporate securities and emerging markets debt of all credit quality ratings.
The Core-Plus Bond Fund’s more flexible yet risk-controlled mandate enables portfolio managers to pursue opportunities across various fixed income sectors and credit qualities. The fund is managed by Vanguard’s world-class Fixed Income Group, an experienced portfolio management team with proven expertise and a track record of producing strong client outcomes across Vanguard’s active taxable fixed income lineup.
“Vanguard continues to invest in active management talent and capabilities, building upon four decades of expertise in running bond portfolios,” says Sara Devereux, global head of Vanguard Fixed Income Group. “This initiative represents our ongoing efforts to improve long-term investor outcomes by offering higher-potential return fixed income strategies with enduring investment merit at a low cost.”
With the addition of Core-Plus Bond, Vanguard now has three thoughtfully designed core bond offers, each of which can serve as the centrepiece of an investor’s fixed income allocation: Vanguard Total Bond Market Index Fund, Vanguard Core Bond Fund, and Vanguard Core-Plus Bond Fund. The Total Bond Market Index Fund is the most conservative option for investors favouring index management. While still conservative, the Core Bond Fund offers the potential to outperform through active management. With greater exposure to high-yield and emerging markets investments, the new Core-Plus Bond Fund is designed for investors who are more comfortable with higher risk in their fixed income allocation and the potential to outperform through active management. However, the fund’s greater exposure to high-yield investments may not be suitable for certain investors.
The Core-Plus Bond Fund is accepting investments during a 10-day subscription period and will begin trading on 25 October. The fund will have an estimated expense ratio of 0.30 per cent for Investor Shares and 0.20 per cent for Admiral Shares, compared with an average expense ratio of 0.45 per cent for industry peers.
As announced earlier this year, the firm is also introducing Vanguard Multi-Sector Income Bond Fund. The fund will offer exposure primarily to US investment-grade securities, US high-yield corporate securities, and emerging markets debt of all credit quality ratings, and will be made available for public investment at a later date.
With USD2.1 trillion in assets under management, Vanguard Fixed Income Group is the world’s largest manager of bond funds and ETFs. Vanguard’s active and index fixed income investment product lineup encompasses US Treasuries, Treasury Inflation-Protected Securities, agency bonds, mortgage-backed securities, corporate credit, municipal debt, sovereign bonds, emerging markets debt, and money markets.
For 40 years, the Fixed Income Group has continuously refined its investment process and evolved decision-making constructs to improve fund performance, and the team has distinguished itself with deep investment capabilities, disciplined security selection process, and rigorous risk management techniques.
The team’s active edge revolves around targeting alpha-generating strategies that are repeatable and scalable without over reliance on large macroeconomic calls. Vanguard also manages funds to be true-to-label, meaning portfolio managers seek outperformance, but investors can rest assured they will stay true to the objective of the fund. Further, Vanguard’s active fixed income investment teams are strengthened by the firm’s unique investor-owned structure—lower fees enable portfolio managers to aim to avoid assuming unattractive risks. In concert, these elements are designed to produce strong risk-adjusted returns and lower drawdowns during periods of market stress. As a result, Vanguard’s track record as an investment manager remains unparalleled—96 per cent of Vanguard active fixed income funds outperformed their peer group averages over the five years ended 30 June, 2021.
