New ETF to offer access to global investment-grade bond universe

September 6, 2018

 

Vanguard today introduced Vanguard Total World Bond ETF (BNDW), the first ETF to offer U.S. investors low-cost, broadly diversified access to the global investment-grade bond universe. The ETF is managed by Vanguard Fixed Income Group.

BNDW gains exposure to the global investment-grade universe by investing in a combination of Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX) held at the market-capitalization weights of the global bond market.

Vanguard Total World Bond ETF is only available in an ETF share class with an estimated expense ratio of 0.09%. As an ETF of ETFs, its direct investment in the existing Vanguard total bond ETFs enable it to achieve immediate scale and access to the global investment-grade bond market. This allows the ETF to seek to closely track the return of the benchmark by keeping the expense ratio and transaction costs lower for investors.

"With BNDW, Vanguard is the first firm to offer U.S. investors a single index product with exposure to the total global investment-grade bond universe," said Vanguard Chief Investment Officer Greg Davis. "It's a simple, convenient, and low-cost way to get the diversification benefits that exposure to bonds of many countries and issuers can offer."

Vanguard Total World Bond ETF is benchmarked to the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index, which combines the Bloomberg Barclays U.S. Aggregate Float Adjusted Index and the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged). This composite index provides a broad-based measure of the global investment-grade fixed-rate debt market, including government, corporate, and securitized bonds, all with maturities of more than one year. As of June 30, 2018, the index consisted of approximately 44% U.S. bonds and 56% non-U.S. bonds.

Vanguard has been a pioneer in bond indexing, having launched the first bond index fund, Vanguard Total Bond Market Index Fund (VBTLX), in 1986. Vanguard Fixed Income Group is one of the world's largest bond fund managers, with $1.2 trillion under management. Vanguard has been a participant in the ETF industry for more than 17 years, meeting the needs of a diverse set of investors with 77 ETFs that together represent more than $746 billion in client assets.*

* Data as of June 30, 2018.

Notes:

  • 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.
  • Diversification does not ensure a profit or protect against a loss.
  • All investing is subject to risk, including the possible loss of the money you invest. Bond funds are subject to interest rate risk, which is the chance bond prices overall will decline because of rising interest rates, and credit risk, which is the chance a bond issuer will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline. 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 the fund's foreign currency exposures and may eliminate any chance for a fund to benefit from favorable fluctuations in relevant currency exchange rates. The Fund will incur expenses to hedge its currency exposures.
 

Our insights straight
to your inbox

Our insights straight to your inbox

Receive our latest Advisor's Digest
research
and commentary sent the
first business
morning every week.

A weekly digest of our latest research and commentary. Topics include the economy and markets, portfolio strategy, ETFs, and practice management.


Fund openings/closings, fund manager changes, dividend distributions, webinars, and other events you might want to know about.



Already registered? Log on to
manage your
email subscriptions.

Advisor's Digest

for April 15, 2019

Advisor's Digest for April 15, 2019

Advisor's Digest

for April 15, 2019