Vanguard Expands Active Fixed Income Offerings With Launch Of New Global Credit Bond Fund

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Nov 15, 2018, 09:00 ET

VALLEY FORGE, Pa., Nov. 15, 2018 /PRNewswire/ -- Vanguard today added to its growing roster of active fixed income offerings with the launch of Vanguard Global Credit Bond Fund. The new actively managed fund will provide investors with diversified exposure to the U.S. and international investment-grade credit markets.

The fund is actively managed to represent the global credit universe, which is comprised of U.S.D.-denominated (~65%) and non-U.S.D.-denominated (~35%, developed and emerging markets) investment grade securities, including those issued by corporate and noncorporate credit entities. The majority of the non-U.S.D.-denominated portfolio is hedged to the U.S. dollar to preserve the fund's credit focus.

"Vanguard has long been recognized as a fixed income leader, offering investors a comprehensive range of bond funds and ETFs covering corporate, government, and municipal markets of varying maturities," said John Hollyer, global head of Vanguard Fixed Income Group. "The new Global Credit Bond Fund is an attractive option for investors seeking an active core holding with diversified, global exposure to credit."

The Global Credit Bond Fund, in keeping with all Vanguard actively managed fixed income funds, seeks to deliver consistent outperformance at a lower cost than most competing funds, thereby offering investors the potential for higher value over time.

Experienced fund management
Vanguard Fixed Income Group serves as the fund's advisor and focuses on identifying relative value across multiple countries, yields, currencies, credit ratings, and cost bases. The fund's investment strategy employs a fundamental approach to identifying relative value based on security selection, sector allocation, and interest rate views.

For more than 35 years, Vanguard Fixed Income Group has been managing bond and money market funds, using its deep investment capabilities, disciplined security selection process, and rigorous risk management techniques to deliver consistent, long-term performance to Vanguard clients. The global team is comprised of more than 175 investment professionals and is responsible for the oversight of $1.3 trillion in assets.

The fund is managed in a highly collaborative and team-based approach, and Daniel Shaykevich and Samuel C. Martinez, CFA, serve as the portfolio managers. Mr. Shaykevich, a Vanguard principal and co-head of the Fixed Income Group's Emerging Markets and Sovereign Debt team, has worked in investment management since 2001 and earned a B.S. from Carnegie Mellon University. Mr. Martinez, co-head of the Structured Products Team in the Fixed Income Group, has worked in investment management since 2010. He has an M.B.A. from The Wharton School of the University of Pennsylvania and a B.S. from Southern Utah University.

A focus on fixed income
Vanguard Global Credit Bond Fund will complement Vanguard's existing suite of 25 actively-managed fixed income funds. Vanguard launched its first internally managed active fixed income fund in 1982 and the world's first bond index fund in 1986.

Vanguard has placed a particular focus on building its fixed income capabilities and offerings over the past several years. The Fixed Income Group has added to the depth and breadth of its global investment team, bringing in and developing talented investment professionals in its portfolio management, trading, and credit research functions. The group has also deepened its active emerging markets and high yield capabilities.

In addition to new capabilities, Vanguard has recently added to its actively managed bond fund lineup by launching Vanguard Emerging Markets Bond Fund and Vanguard Core Bond Fund in 2016, and Vanguard Ultra-Short-Term Bond Fund in 2015.

Low costs: A critical determinant
Vanguard offers a broad roster of low-cost actively managed bond funds, featuring an average asset weighted expense ratio of 0.11%.

"High expenses can easily consume a good portion of a bond fund's yield, so it's important for investors to pay strict attention to cost when evaluating fixed income products," said Mr. Hollyer. "Low costs are also important to the management of Vanguard's active fixed income portfolios, giving us the ability to take less risk to generate competitive returns."

The new fund offers Investor Shares with an expense ratio of 0.35% and Admiral™ Shares with an expense ratio of 0.25%, which makes the fund among the lowest-cost global bond funds in the industry. The asset-weighted average expense ratio of active funds in the world bond category is 0.65% (source: Morningstar).

About Vanguard
Vanguard is one of the world's largest investment management companies. As of September 30, 2018, Vanguard managed $5.3 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 411 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.

Asset figures as of September 30, 2018, unless otherwise noted.

For more information about Vanguard funds, visit vanguard.com or call 877-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

Bond funds are subject to interest rate risk, which is the chance bond prices overall will decline because of rising interest rates, and credit risk, which is the chance a bond issuer will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline. Investments in bonds issued by non-U.S. companies and governments are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.

Vanguard Global Credit Bond Fund is subject to currency hedging risk, which is the chance that currency hedging transactions may not perfectly offset the fund's foreign currency exposures and may eliminate any chance for the fund to benefit from favorable fluctuations in relevant currency exchange rates. The fund will incur expenses to hedge its currency exposures.

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SOURCE Vanguard