VALLEY FORGE, Pa., May 21, 2018 /PRNewswire/ -- Vanguard today filed a preliminary registration statement with the Securities and Exchange Commission for Vanguard Total World Bond ETF. The ETF will be the industry's first U.S.-domiciled index product offering investors access to the entire global investment-grade bond universe in a single portfolio. It is expected to launch in the third quarter of this year.
The fund will be structured as an ETF of ETFs, investing directly in two existing low-cost ETFs: Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX). This structure enables the Vanguard Total World Bond ETF to achieve immediate scale by using existing exposure from the underlying ETFs and is expected to result in tighter bid/ask spreads and lower operating expenses than investing directly in the benchmark's constituents. The approach is similar to Vanguard Total Corporate Bond ETF (VTC), which launched in November, 2017, and invests in Vanguard's existing short-, intermediate-, and long-term corporate bond ETFs.
"With the Total World Bond ETF, Vanguard will be the first firm to offer U.S. investors a single index product with exposure to the entire global investment-grade bond universe," said Vanguard Chief Investment Officer Greg Davis. "It will be simple, convenient, and highly diversified, with an expense ratio in line with our current low-cost fixed income ETFs."
The new ETF seeks to track the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index and will have an estimated expense ratio of 0.09%.1
The benefits of global fixed income diversification
Vanguard research shows that currency-hedged global bond exposure provides diversification benefits that can reduce volatility and smooth returns over time. Two of the most important drivers of bond returns are interest rates and inflation, factors that fluctuate in other countries in patterns that have not historically been correlated with the United States or one another. A portfolio that includes bonds of many countries and issuers may offer a diversification benefit as a result of exposure to the different issuers and yield curves. The Vanguard Total World Bond ETF will be diversified across the maturity spectrum and credit risks of multiple countries.
A fixed income leader
Vanguard Fixed Income Group will serve as the investment advisor to Vanguard Total World Bond ETF. The group manages more than $1.3 trillion in assets and employs more than 175 investment professionals across the globe. Through April 2018, Vanguard's global lineup of 130 fixed income mutual funds and ETFs have experienced more than $45 billion in global cash flow.
The Fixed Income Group has had a particular focus on building out the depth and breadth of the investment team, including adding talented investment professionals to the portfolio management, trading, and credit research functions around the globe. The group has built out its active emerging markets team since 2013 by hiring two portfolio managers in addition to a research lead, three analysts, and two traders. The Fixed Income Group also enhanced its active high yield capabilities in 2017 with the hire of a portfolio manager as well as three analysts. These teams seek to add alpha within the existing mandates of the group's active lineup.
Vanguard is one of the world's largest investment management companies. As of April 30, 2018, Vanguard managed $5.0 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 396 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.
Asset figures as of April 30, 2018, unless otherwise noted.
1Estimated as of May 21, 2018
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. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.
A registration statement relating to the Vanguard ETF shares 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.
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. Investments in bonds issued by non-U.S. companies and governments are subject to risks including country/regional risk and currency risk.
Vanguard Total World Bond ETF is subject to currency hedging risk, which is the chance that currency hedging transactions may not perfectly offset a fund's foreign currency exposures and may eliminate any chance for a fund to benefit from favorable fluctuations in relevant currency exchange rates.