Vanguard emerging markets government bond fund's benchmark to be modified

May 1, 2019


Investors seeking to diversify their fixed income portfolios with exposure to emerging markets government bonds have an enhanced tool at their disposal. It follows a modification of the Bloomberg Barclays USD Emerging Markets Government RIC Capped Index, the target benchmark for the $1.5 billion Vanguard Emerging Markets Government Bond Index Fund (Admiral™ Shares: VGAVX, Investor Shares: VGOVX, Institutional Shares: VGIVX) and Vanguard Emerging Markets Government Bond ETF (VWOB).

On May 1, 2019, Bloomberg modified the methodology of the Bloomberg Barclays USD Emerging Markets Government RIC Capped Index. Bloomberg increased the quasi-sovereign bond issuance amount outstanding that is required for inclusion in the index from $500 million or more to $1.5 billion. Quasi-sovereign bond debt is debt issued by corporations that are at least 50% government-backed or government-owned.

This benchmark transition was completed over a month-long period during the second quarter of 2019 with minimal transaction costs to the fund. Vanguard believes this change will improve the portfolio’s liquidity while maintaining its broad exposure to emerging-market bonds.

"The benchmark change is expected to benefit investors by reducing the portfolio's exposure to less-liquid securities and lowering transaction costs," said Matthew Brancato, head of Vanguard Portfolio Review Department. "The portfolio will continue to offer broadly diversified emerging-market fixed income exposure, and we anticipate minimal impact on credit quality and duration."

How the portfolio will be affected

The methodology change to the benchmark resulted in several modest changes to the attributes of the Emerging Markets Government Bond Index Fund. Previously, the methodology included a bond issuance minimum of $500 million for both sovereign and quasi-sovereign bonds. The new methodology maintains the sovereign bond issuance minimum of $500 million but it raises the quasi-sovereign bond issuance minimum to $1.5 billion.

As a result, the fund reduced its holdings in less-liquid quasi-sovereign bonds, which tend to be more costly and challenging to trade.

The fund offers exposure to 72 markets. While this is a slight reduction from the current 75 markets, the excluded markets collectively represent less than 1% of the fund’s assets. Vanguard’s portfolio still will be among the most diversified available.

A comparison among the current index methodology, the new methodology, and the J.P. Morgan EMBI Global Core Index, can be found here.


  • For more information about Vanguard funds, visit or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
  • All investing is subject to risk, including the possible loss of the money you invest.
  • Investments in bonds are subject to interest rate, credit, and inflation risk.

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