VALLEY FORGE, PA (August 8, 2017)—Vanguard, a leading provider of bond index funds and ETFs, announced plans today to change the target benchmarks of three government bond index funds and ETFs to pure Treasury indexes.
Vanguard Short-Term Government Bond Index Fund and ETF (VSBSX/VGSH), Vanguard Intermediate-Term Government Bond Index Fund and ETF (VSIGX/VGIT), and Vanguard Long-Term Government Bond Index Fund and ETF (VLGSX/VGLT) are expected to transition from Bloomberg Barclays US Government Float-Adjusted indexes to Bloomberg Barclays US Treasury Float Adjusted indexes in the fourth quarter of this year. The funds will be renamed to reflect the new benchmarks, as detailed in the table below.
“Following the transition, the funds will offer investors pure exposure to discrete segments of the U.S. Treasury market and provide them the flexibility to tailor their bond portfolios to reflect their risk and return objectives,” said Greg Davis, Vanguard’s chief investment officer. “In addition, with the greater liquidity in the Treasury market, we expect that the bid-ask spreads on the funds’ ETF shares will be considerably lower.”
Following the transition, advisors, institutions, and individual investors will have a choice of index or active options in a range of maturities covering the corporate and U.S. Treasury market. Vanguard offers series of short-, intermediate-, and long-term active and index corporate credit funds, and a series of active U.S. Treasury funds. The move from government to U.S. Treasury index funds results in a series that will complement existing actively managed counterparts.
A fixed income leader
Vanguard Fixed Income Group is one of the largest bond fund managers in the world with more than $1.2 trillion under management. The group oversees portfolios of both active and indexed domestic and international bonds, municipal bonds, money market securities, and stable value assets.
Vanguard pioneered bond indexing with the introduction of Vanguard Total Bond Market Index Fund in 1986. Today, the fund is the largest bond fund1 with $183 billion in assets.
Vanguard launched its first suite of fixed income ETFs in 2007. Today, the firm is the second largest manager of bond ETFs1, with 16 products and $131 billion in assets. Five of the 10 largest bond ETFs are Vanguard ETFs: Vanguard Total Bond Market ETF (BND) $34.6 billion; Vanguard Short Term Bond ETF (BSV) $22.0 billion; Vanguard Short-Term Corporate Bond ETF (VCSH) $19.6 billion; Vanguard Intermediate-Term Corporate Bond ETF (VCIT) $15.2 billion; and Vanguard Intermediate-Term Bond ETF (BIV) $13.8 billion.1
Vanguard has continued to thoughtfully add to its bond index and ETF lineup, introducing Vanguard Short-Term Inflation-Protected Securities Fund (VTAPX/VTAP) in 2012; Vanguard Total International Bond Index Fund (VTBAX/BNDX) and Vanguard Emerging Markets Government Bond Index Fund (VGAVX/VWOB) in 2013; and Vanguard Tax-Exempt Bond Index Fund (VTEAX/VTEB) in 2015. Vanguard has also broadened its actively managed bond fund stable by launching Vanguard Ultra-Short-Term Bond Fund (VUSFX) in 2015 and Vanguard Core Bond Fund (VCOBX) in 2016.
“Vanguard will continue to look for opportunities to broaden our bond ETF lineup with products that meet a durable and long-term investment need,” said Mr. Davis.
Role of bonds
Despite a low-yield environment, bonds can play a critical role as a diversifier in investors’ portfolios.
“We believe bonds are an important component of a balanced portfolio, and investors should have exposure to both domestic and international bonds,” said John Hollyer, Global Head of Vanguard Fixed Income Group. “Investors should also pay close attention to costs, as the impact of fees is amplified in a low-yield market environment.”
Vanguard expects no changes to the funds’ expense ratios and minimal, if any, capital gains realizations as a result of the transition.
About Vanguard Vanguard is one of the world’s largest investment management companies. As of June 30, 2017, Vanguard managed $4.4 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 368 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.
1Source: Morningstar data as of June 30, 2017.
Asset figures as of June 30, 2017, unless otherwise noted.
For more information about Vanguard funds and ETFs, visit vanguard.com or call 800-662-7447 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.
Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.
Vanguard Marketing Corporation, Distributor of the Vanguard Funds.
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 the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments.
While U.S. Treasury or government agency securities provide substantial protection against credit risk, they do not protect investors against price changes due to changing interest rates. While the market values of government securities are not guaranteed and may fluctuate, these securities are guaranteed as to the timely payment of principal and interest. Although the income from the U.S. Treasury obligations held in the fund is subject to federal income tax, some or all of that income may be exempt from state and local taxes.