Vanguard active fixed income: Built for success

Our active fixed income lineup

Whether a plan sponsor, a pension fund, a nonprofit, or a consultant, all are seeking that holy grail—consistent outperformance without undue risk. Over the long term, it's not implausible with the right combination of factors, especially in fixed income.

Some firms may tout their size, talent, process, or results, but none can match the unique blend of all that Vanguard brings. We’re one of the most trusted companies in asset management for a reason.

We're also one of the largest, giving us the scale, clout, and ability to deliver cost efficiencies and attract top talent. We’ve been actively managing bond funds for nearly four decades, enhancing our research, talent pool, and risk management strategy, further refining our time-tested, repeatable investment process. The results speak for themselves:

90% of Vanguard's active taxable fixed income funds are in the top quartile of their Lipper peer group based on ten-year returns.

Such results helped Vanguard become the Refinitiv Lipper Fund Awards Winner U.S. 2021, Best Large Fixed Income Company. To hear directly from Vanguard bond managers on what sets us apart, watch this series of short videos.

Philosophy

The following pillars of our investment management approach are all geared toward delivering compounding alpha—more consistent outperformance with less downside risk:

Talent, culture, process

Talent, culture, process

Deep expertise, a collaborative culture, and a repeatable investment process are the foundation of our success.

Diversified sources of alpha

Diversified sources of alpha

We construct portfolios from a diverse set of high information ratio strategies rather than relying on concentrated risk positions.

True-to-label products

True-to-label products

You can be confident that our funds and trusts are designed to behave the way you would expect for their mandates and asset classes. There are no surprises that could sabotage your asset allocation strategy when you need it most.

Smart risk-taking

Smart risk-taking

Risk optimization is integral in every step of the process. Lower fees also enable competitive net alpha without undue risk.

Client-aligned business

Client-aligned business

Our scale and unique investor-owned structure allow us to deliver superior value through lower fees that help clients keep more of their returns.2

 

People and process

Our investment process is characterized by deep specialization and constant collaboration.

Vanguard’s dedicated active taxable fixed income team of 90+ professionals—senior leaders, portfolio managers, researchers, traders, and risk specialists—work together to support all relevant products. Unlike at other firms that may have an "A team" or a "B team," all Vanguard bond funds and trusts benefit from our top talent.

Concentric circle chart showing Vanguard's active fixed income collaborative investment process, with each circle representing a different team's input: Top-down macroeconomic analysis and bottom-up sector views inform credit and rates strategy; credit and rates strategy informs portfolio management; and a back-and-forth exists between portfolio management and subsector and issuer selection. Outer circle represents governance and risk oversight that surrounds the entire process.

Credit and rates

Leaders of the credit and rates teams develop a macroeconomic framework of top-down insights combined with bottom-up views from the sector teams, exploring relative values across sectors and setting the overall credit and rates strategy.

Portfolio management

Fund-specific portfolio management teams collaborate to tailor these strategies to their respective portfolios given each specific mandate’s opportunity set and objectives.

Sector teams

We provide bottom-up selection of subsectors, issuers, and securities through rigorous fundamental research.

Oversight

The Senior Investment Committee and Risk Management Group maintain oversight and governance through every stage of the process.

Products

Vanguard offers a variety of active mandates for nearly every need across the credit and duration spectrum. Here are just three of them:

VCOBXVanguard Core Bond Fund Admiral Shares

Serves as the anchor for a fixed income portfolio. Outperformed 96% of its peers over three years without taking on undue risk.3

2075Vanguard Long-Term Investment-Grade Trust

For pension funds seeking liability matching or institutional investors seeking higher income but comfortable with greater price volatility. Outpaced its benchmark by 187 basis points since inception through year-end 2020.4

VEGBXVanguard Emerging Markets Bond Fund Admiral Shares

Complements a core holding with added diversification and total return enhancement. Outperformed 100% of its peers over three years.5

Need more information about Vanguard active fixed income products?

Whether you need market-tested bond funds to round out your plan lineup or a quality product to match liabilities, our experts can help.

Contact your Vanguard representative or call us at 800-523-1036.

1 Based on data from Lipper, a Thomson Reuter Company, for the 10 years through December 31, 2020. Out of 10 Vanguard active taxable bond funds, 9 were in the top quartile of their respective peer groups. Results will vary for other time periods. Only funds with a minimum ten-year history were included in the comparison. Only Vanguard's Admiral Shares were used for this comparison, as that share class is most commonly used for institutional investors.

Additional performance information:
If you include all share classes: For the three-year period, 23 of 28 active taxable fixed income fund share classes exhibited top-quartile performance relative to peer funds in their Lipper categories. For the five-year period, 16 of 24 active taxable fixed income fund share classes exhibited top-quartile performance relative to peer funds in their Lipper categories. For the ten-year period, 17 of 22 active taxable fixed income fund share classes exhibited top-quartile performance relative to peer funds in their Lipper categories. (Source: Lipper, a Thomson Reuters Company.) In addition, 28 of 32 of active taxable fixed income fund share classes are in the lowest quartile of expense ratios. (Source: Morningstar.)

The following is data against Lipper peer-group averages: For the three-year period, 47 of 52 Vanguard active bond funds outperformed their peer-group averages. For the five-year period, 44 of 48 Vanguard active bond funds outperformed their peer-group averages. For the ten-year period, 38 of 44 Vanguard active bond funds outperformed their peer-group averages. (Source: Lipper, a Thomson Reuters Company.)

All data as of December 31, 2020. Results will vary for other time periods. Only funds with a minimum three-, five-, or ten-year history, respectively, were included in the comparison. Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit our website at www.vanguard.com/performance.

2 Fund shareholders own the funds that own Vanguard. Vanguard U.S. funds' average asset-weighted expense ratio is 0.09% compared with 0.54% for the industry, excluding Vanguard. Sources: Vanguard and Morningstar, a Thomson Reuters company. Data as of December 31, 2020.

3 Based on both its total return and risk-adjusted performance (Sharpe ratio) compared with the 421 peers in Morningstar's intermediate core bond category that had a minimum three-year history as of December 31, 2020. Results will vary over other time periods. Sources: Vanguard and Morningstar, Inc. For the most recent relative performance, go to the fund's page.

4 Inception date for the Trust is October 31, 2019. The benchmark is the Bloomberg Barclays U.S. Long Credit A Better Bond Index. Returns are as of December 31, 2020. For the most recent relative performance, go to the product page.

5 Returns as of December 31, 2020. Based on total return of the fund compared with the 228 funds in the Lipper peer-group category (Emerging Markets Hard Currency Debt Funds) that had a minimum three-year history as of December 31, 2020. Results will vary with other time periods. For the most recent relative performance, go to the fund's page. Sources: Vanguard and Lipper, a Thompson Reuters company.

All investing is subject to risk, including possible loss of principal. 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 are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.

Vanguard is investor-owned, meaning the fund shareholders own the funds, which in turn own Vanguard.

Vanguard Long-Term Investment Grade Trust is not a mutual fund. It is a collective trust available only to tax-qualified plans and their eligible participants. The collective trust mandates are managed by Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc. Investment objectives, risks, charges, expenses, and other important information should be considered carefully before investing.

Refinitiv Lipper's fund awards are based on their "consistent return" measure using historical risk-adjusted returns relative to peers over three, five, and ten years. Group awards are for three-year periods. Group awards are divided between large and small companies based on the company's number of funds in each asset class and assets under management. For more detailed information on their methodology, visit https://www.lipperfundawards.com/Methodology.

Vanguard accepts no responsibility for content on third party websites.