Vanguard files for active Core-Plus Bond Fund

July 29, 2021

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Vanguard plans to introduce an active taxable fixed income fund that will pursue outperformance by investing in U.S. investment-grade securities as well as high-yield corporate securities and emerging markets debt. The fund is expected to launch in the fourth quarter of 2021.

Vanguard Core-Plus Bond Fund will seek to provide total return while generating a moderate to high level of current income, according to the initial registration statement filed today with the Securities and Exchange Commission.

The broadly diversified portfolio will be invested primarily in Treasury, mortgage-backed, and other U.S. investment-grade securities. In addition, the fund will have the flexibility to invest beyond the U.S. investment-grade bond market in areas such as high-yield corporates and emerging markets debt of all credit quality ratings. The total below-investment-grade exposure in the portfolio will be capped by a limit in the prospectus at 35%.

The fund's benchmark will be the Bloomberg Barclays U.S. Universal Total Return Index. Vanguard Fixed Income Group will serve as the fund's investment advisor.

"Vanguard has invested heavily in active management talent and capabilities for decades, resulting in a lineup of active bond funds that leverage proven portfolio manager expertise and help clients achieve investment success," said Kaitlyn Caughlin, head of Vanguard Portfolio Review Department. "Vanguard's client-centric approach to product development has produced a carefully curated lineup that drives long-term value and meets evolving investor needs."

Two low-cost share classes will be offered: Admiral™ Shares and Investor Shares, with estimated expense ratios of 0.20% and 0.30%, respectively. The average asset-weighted expense ratio of funds in the Morningstar core-plus bond category was 0.48% as of June 30, 2021.

The fund will be differentiated from the $5.5 billion Vanguard Core Bond Fund (Admiral Shares VCOBX, Investor Shares VCORX) by giving its portfolio managers incremental flexibility across sectors to seek higher performance, particularly through greater exposure to high-yield and emerging markets fixed income securities. The Core-Plus Bond Fund is expected to take on more absolute risk and active risk than the Core Bond Fund.

Vanguard also filed an initial registration statement today for another actively managed fund, Vanguard Multi-Sector Income Bond Fund. The fund will offer exposure to three primary satellite allocations for fixed income investors: investment-grade securities, high-yield corporate securities, and emerging markets debt of all qualities. The total below-investment-grade exposure of the portfolio will be capped by a limit in the prospectus at 65%. The fund will also be managed by Vanguard Fixed Income Group. It will not be available for public investment upon launch.

Expanding our active taxable fixed income lineup

The proposed funds reflect Vanguard's continuous effort to improve long-term outcomes for fixed income investors seeking outperformance. In recent years, we have invested significantly in active bond portfolio management capabilities and introduced an array of new products, including the $270.9 million Vanguard Global Credit Bond Fund (Admiral Shares VGCAX; Investor Shares VGCIX) and the $2.4 billion Vanguard Emerging Markets Bond Fund (Admiral Shares VEGBX; Investor Shares VEMBX).

Transparent product design consistent with the expectations for each mandate and our differentiated risk approach reinforced by low expense ratios are key tenets of our active taxable fixed income philosophy.

For nearly 40 years, Vanguard Fixed Income Group has been distinguished in the industry by its deep investment capabilities, disciplined security selection process, and rigorous risk management techniques and has delivered consistent long-term performance to Vanguard clients.1

The Fixed Income Group has more than 190 tenured investment professionals and trading hubs on three continents. Its deep specialization and collaborative culture serve as the foundation of its investment process and fuel its active edge.

Vanguard Principal and Senior Portfolio Manager Daniel Shaykevich and Senior Portfolio Managers Brian W. Quigley, CFA, Arvind Narayanan, CFA, and Michael Chang, CFA, will serve as co-portfolio managers of the Core-Plus Bond Fund.

Mr. Shaykevich has worked in investment management since 2001, has managed investment portfolios since 2004, and has been with Vanguard since 2013. He earned a B.S. from Carnegie Mellon University.

Mr. Quigley has been with Vanguard since 2003, has worked in investment management since 2005, and has managed investment portfolios since 2015. He earned a B.S. from Lehigh University.

Mr. Narayanan has been with Vanguard since 2019, has worked in investment management since 2002, and has managed investment portfolios since 2006. He earned a B.A. from Goucher College and an M.B.A. from New York University.

Mr. Chang has worked in investment management since 2002, has managed investment portfolios since 2011, and has been with Vanguard since 2017. He earned a B.Com. from the University of British Columbia.

1 For the 10 years ended June 30, 2021, 67 of 82 Vanguard bond funds and 39 of 44 Vanguard actively managed bond funds outperformed their peer group averages (source: Lipper, a Thomson Reuters Company). Results will vary for other time periods. Only funds with a minimum 10-year history 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 vanguard.com/performance.

Notes:

  • Registration statements relating to Vanguard Core-Plus Bond Fund and Vanguard Multi-Sector Income Bond Fund have been filed with the Securities and Exchange Commission (SEC) but have not yet become effective. The SEC has not approved or disapproved these securities or passed upon the adequacy of either fund's preliminary prospectus. Any representation to the contrary is considered a criminal offense. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statements become 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, obtain a prospectus (or summary prospectus, if available) or call/800-523-1036 to request one. Investment objectives, risks, charges, expenses, and other important information 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.
  • 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 are subject to interest rate, credit, and inflation risk.
  • Investments in securities issued by non-U.S. companies and governments are subject to risks including country/regional risk and currency risk.
  • All asset figures are as of June 30, 2021, unless otherwise noted.
  • CFA® is a registered trademark owned by CFA Institute.