Vanguard has made a significant foray into fixed income markets, launching its first actively-managed commercial bond fund, directly competing with other low-cost providers.
The world’s second largest passive fund provider, which runs $4.4 trillion (£3.3 trillion) globally, will price its Vanguard Global Credit Bond fund at 0.35% for retail and 0.3% for institutional clients.
While interest in fixed income ETFs has rapidly grown in the last year, potential index risk concentration in the largest bond issuers makes them poorly suited for long-term allocation.
The fund will be managed by Vanguard’s fixed income group which runs $1.5 trillion in client funds and has a record of active management stretching back 35 years.
‘The case for investing in high quality, liquid global credit bonds is compelling as it can offer a reasonable income compared with other bond and equity income strategies,’ said Paul Malloy, the company’s head of fixed income in Europe.
‘The fund will invest in will typically have lower volatility than high yield bonds or equities, helping to offset a portfolio’s return volatility. Investors should also pay close attention to costs, as the impact of fees is amplified in a low-yield market environment’
The company launched its first actively managed funds into the UK last year.