New global bond fund provides a universal fixed income option

Vanguard | 12 October 2017


A new fixed income option from Vanguard Australia that provides access to a global bond index portfolio is now open to investors through both a wholesale managed fund and an exchange-traded fund (ETF).

The Vanguard Global Aggregate Bond Index Fund (Hedged) and the Vanguard Global Aggregate Bond Index ETF (Hedged) (ASX: VBND), both available from today, are options for investors looking for broadly diversified fixed income exposure through a single fund, whether it be a listed or non-listed vehicle.

Tracking the returns of the Bloomberg Barclays Global Aggregate Float Adjusted Index, the funds provide low-cost exposure to an index representing more than 20,000 high-quality, income-generating securities from nearly 4000 issuers, including governments, government-related entities and investment-grade corporations from around the world. 

It provides investors with a straightforward single option that combines the exposures within the Vanguard International Fixed Interest Index Fund (Hedged) and the Vanguard International Credit Securities Index Fund (Hedged), with the addition of investment-grade securitised debt.

Both the wholesale managed fund share class and the ETF share class come with Vanguard's trademark low management costs, with annual expenses at 0.24 per cent p.a. for the wholesale fund and the ETF at 0.20 per cent p.a.

Vanguard Australia Head of Product, Evan Reedman, said the fund would play an integral part in Vanguard's fixed income line-up, forming a logical starting point for investors looking to gain broadly diversified exposure to bonds.

“We have spent several years building out our fixed income product suite in Australia, and the Global Aggregate Bond Fund and ETF represent a major milestone in this evolution,” Mr Reedman said.

“Investors now have the opportunity to access fixed income managed funds and ETFs to either build a tailored exposure to different types of debt across the Australian and international markets, or access a single, globally diversified index strategy.

“These new funds allow investors to build the core of their fixed income exposure through either a listed or non-listed structure, and gain low-cost exposure to an index containing more than 20,000 investment-grade government and credit securities world-wide.”

Vanguard Head of Fixed Income, Asia-Pacific, Jeffrey Johnson, said global fixed income exposure continues to play an important role in investors' portfolios as a diversifier and income generator, even in a period of rising interest rates.

“Bonds can play a crucial role in most investors' portfolios by providing diversification relative to riskier asset classes like equities, while also providing income and downside protection,” Mr Johnson said.

“Even though we're seeing signals that point to a rising interest rate environment, rising interest rates are ultimately a good thing for bond investors with an intermediate-to-long-term time horizon, as it means that they are poised to earn higher income. Timing these cycles is exceptionally difficult, making a globally diversified approach an effective tool for many investors.

“One of the best ways to safeguard a portfolio is through maximum diversification across fixed income sectors, and a high-quality, low-cost index strategy with global reach is a great starting point for investors looking to gain this exposure.”