VALLEY FORGE, PA (August 09, 2018) — Vanguard today filed a preliminary registration statement with the Securities and Exchange Commission for Vanguard Global Credit Bond Fund. The new actively managed fund, expected to launch in November 2018, will provide investors with diversified, predominately investment-grade exposure to the U.S. and international credit markets.
“Our clients are increasingly looking to reduce their home bias and harness the return potential and diversification benefits offered by the international equity and fixed income markets,” said John Hollyer, global head of Vanguard Fixed Income Group. “The new Global Credit Bond Fund’s wide range of security selection opportunities and regional and sector exposures, combined with the flexibility of active management, will make it an attractive, core or satellite portfolio holding.”
The fund will invest in both corporate and non-corporate obligations, and will exclude government-guaranteed issues. Most of the non-U.S. portion of the portfolio will be hedged to the U.S. dollar, enabling investors to pursue a global credit premium without adding currency risk.
The fund’s advisor will focus on identifying relative value across multiple countries, yields, currencies, credit ratings, and cost bases. Security selection, sector allocation, and interest rate views will factor into portfolio decisions. A majority of the fund will be invested in U.S. securities, with the remainder in non-U.S. securities, representing both developed and emerging markets.
The fund will be managed by Vanguard’s Fixed Income Group, a global team of more than 170 investment professionals responsible for the oversight of over $1.3 trillion in assets. For more than 35 years, the tenured group has used its deep investment capabilities, disciplined credit-security-selection process, and rigorous risk management techniques to deliver consistent long-term performance for Vanguard clients.
A low-cost entry into global bond category
The fund will offer two share classes: 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 for the world bond category is 0.74% (source: Morningstar). Lower expenses result in enhanced value for Vanguard clients.
A focus on fixed income
Vanguard Global Credit Bond Fund will complement Vanguard’s existing suite of 25 actively managed fixed income funds, not including Vanguard’s actively managed money market 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. 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 added to its active emerging markets and high yield capabilities in recent years.
On the product side, Vanguard has added to its actively managed bond fund lineup over the past several years by launching Vanguard Ultra-Short-Term Bond Fund in 2015, Vanguard Core Bond Fund in 2016, and Vanguard Emerging Markets Bond Fund in 2017. This suite of new funds is an outcome of the substantial investment and buildout of Vanguard’s active fixed income capabilities across the globe. Vanguard has also expanded its bond ETF lineup, introducing Vanguard Tax-Exempt Bond Index ETF (VTEB) in 2015, Vanguard Total Corporate ETF (VTC) in 2017, and Vanguard Total World Bond ETF, which is expected to be available for investment later this year.
Vanguard is one of the world’s largest investment management companies. As of June 30, 2018, Vanguard managed $5.1 trillion in global assets, including approximately $1.3 trillion in fixed income. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 400 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.
Asset figures as of June 30, 2018, unless otherwise noted.
A registration statement relating to the Vanguard Global Credit Bond Fund has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
For more information about Vanguard funds, visit institutional.vanguard.com or call 800-523-1036 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. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.
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.
All investing is subject to risk, including the possible loss of the money you invest. 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. Diversification does not ensure a profit or protect against a loss. Currency hedging transactions may not perfectly offset the fund's foreign currency exposures and may eliminate any chance for a fund to benefit from favorable fluctuations in those currencies. The fund will incur expenses to hedge its currency exposures.
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