Commentary October 12, 2021 at 07:44 AM Share & Print
What You Need to Know
- The Vanguard Core-Plus Bond Fund will be the firm’s first actively managed mutual fund to launch this year.
- Vanguard launched its first-ever active bond ETF in April.
- The Core-Plus Bond Fund will invest primarily in U.S. investment-grade debt but has flexibility to buy riskier bonds.
Vanguard has opened a 10-day subscription period for the launch of its Core-Plus Bond Fund which will begin trading on Oct. 25.
It will be the firm’s first actively managed mutual fund to launch this year, according to a spokeswoman. Vanguard launched its first ever active bond ETF in April, the Vanguard Ultra-Short Bond ETF (VUSB).
The actively managed Core-Plus Bond Fund will invest primarily in U.S. Treasury, mortgage-backed and other investment grade securities, but may also invest in riskier fixed income securities such as high-yield corporate bonds and emerging market debt of all credit quality ratings.
That additional flexibility to go beyond investment grade debt distinguishes the Core-Plus Bond Fund from the Vanguard Core Bond Mutual Fund. Like its predecessor, the Core-Plus Fund will be managed by Vanguard’s Fixed Income Group, which oversees $2.1 trillion in assets under management in both active and index fund products.
Sara Devereux, the global head of the Fixed Income Group, said the new fund represents the asset manager’s “ongoing efforts to improve long-term investor outcomes by offering higher potential return fixed income strategies with enduring investment merit at low cost.
The Core-Plus Bond Fund has an estimated expense ratio of 0.30% for Investor shares (trading symbol VCPIX) and 0.20% for Admiral shares (VCPAX), which require a $50,000 minimum investment. Those fees are well below the average fee of 0.45% for industry peers, according to Vanguard and Morningstar. They are also slightly higher than the fees of the Vanguard Core Bond Fund — five basis points higher for Investor and shares 10 basis points higher for Admiral shares.
Vanguard also has plans to introduce its Multi-Sector Income Bond Fund, whose registration filing with the Securities and Exchange Commission coincided with that of the Core-Plus Bond Fund. The multi-sector fund, too, will invest in U.S. investment-grade and high-yield corporate securities and emerging market debt of all credit quality ratings but presumably with different allocations to those markets than the Core-Plus Bond Fund.
Vanguard said the multi-sector bond fund “will be made available for public investment at a later date.” A spokeswoman could not provide anything more specific on its debut.
As of Aug. 31, Vanguard had $8.3 trillion in global assets, making it the world’s second largest asset manager after BlackRock, with over $9 trillion in assets.