A smarter liquidity solution: VGUS and VBIL

Clients primarily seek out ultrashort bond products because they provide a combination of safety and liquidity, especially during times of economic stress. They’ve seen significant cash flow so far this year.

With volatility being a continuing concern, it’s important for advisors to understand what they own so they can assess what makes the most sense for their clients.

The performance of a portfolio’s liquidity sleeve should be stable and predictable, but the underlying bank loans that back collateralized loan obligations (CLO) are much more sensitive to economic downturns and exhibit higher rates of default and loss than higher rated corporate bonds or government bonds. 

While the AAA CLOs that JAAA invests in can enhance yields, this comes at the cost of higher credit risk and liquidity risk that can create unwanted instability in your portfolio during times of market stress. And although CLOs have benefited from the rate-hiking cycle and benign credit backdrop over the last few years, history has proven they can experience significant price volatility when risk sentiment shifts negative. This was seen recently during the tariff-induced volatility in April.

VBIL and VGUS, on the other hand, provide more predictable performance due to zero credit risk and lower liquidity risk compared to JAAA.

VGUS and VBIL are pure Treasury ETFs that seek to offer a high level of principal protection alongside tax-efficient income. With zero credit and lower liquidity risk compared to JAAA, VBIL and VGUS may be more reliable choices for your clients' cash management needs.  

Consider VGUS and VBIL now.

Notes:

For more information about Vanguard funds or Vanguard ETFs, visit advisors.vanguard.com 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.

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.

All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.

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. U.S. government backing of Treasury or agency securities applies only to the underlying securities and does not prevent share-price fluctuations. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest.

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