Play better offense and defense with Vanguard Multi-Sector Bond ETF

Most advisors have discretion and control over their clients’ portfolios. That makes you—to use a football analogy—the head coach over their investments.

Consider: Not every head coach calls every play or decides which players are on the field. Coordinators or specific coaches may make those decisions. In a similar fashion, you may decide to delegate some investment decisions to an experienced active asset manager.

A new ETF: That’s where the active Vanguard Multi-Sector Income Bond ETF, ticker VGMS, can play a role.

Sometimes you want more out of bonds: more income, more return. That’s especially true for those clients seeking income for retirement.

VGMS, which launched on June 11, 2025, is designed to offer significant allocations in asset classes that historically offer higher yields than U.S. Treasuries and government debt:

• Investment-grade corporates
• High-yield bonds
• Emerging markets bonds
• Asset-backed securities

Unlocking value: VGMS is also built on the powerful premise that active management across multiple credit sectors can unlock value and income opportunities. 

This design gives the portfolio management team the flexibility to rotate among credit sectors and select securities based on credit fundamentals, relative value, and macroeconomic trends—in the same way an offensive coordinator changes plays or a defensive coordinator changes coverages as the situation warrants. Vanguard’s investments process, which combines top-down macroeconomic views with bottom-up sector and securities analysis, is infused into this strategy.

More capabilities: Vanguard’s Multi-Sector Income strategy now includes structured products, which include asset-backed securities, commercial mortgage-backed securities, and residential mortgage-backed securities.

The structured products team, which includes eight professionals with an average of 20 years of experience, manages $17 billion across Vanguard’s portfolios as of March 31, 2025.

Beyond the Agg: Many fixed income ETFs and funds are benchmarked to the Bloomberg US Aggregate Index (commonly known as the Agg), a broad index dominated by U.S. Treasuries and government issues. VGMS is designed to go beyond the Agg, especially in the high-yield and emerging markets sectors that are not included in the index.

Experience: VGMS is run by Vanguard Fixed Income Group, which has distinguished itself in managing active bond funds for more than 40 years. VGMS has the same portfolio managers as Vanguard Multi-Sector Income Bond Fund, which will celebrate its four-year anniversary since inception on October 12, 2025. 

Portfolio managers Michael Chang, Daniel Shaykevich, and Arvind Narayanan each have more than two decades of investment experience.

A competitive advantage: The ETF’s expense ratio is 0.30%. That’s among the lowest-cost options in the category¹ That helps clients retain more of their potential returns and enables the management team to be more thoughtful about adding risk, rather than possibly taking higher risks simply to overcome a high fee hurdle rate.

VGMS is designed to be similar to Vanguard Multi-Sector Income Bond Fund. However, the fund is a standalone product that’s separate and distinct from VGMS. Differences in scale, certain investment processes, and underlying holdings are expected to produce different investment returns by the funds.

Use case: Because of its credit orientation, VGMS may pair well with a government securities strategy. That could be ETFs that invest in U.S. Treasuries and target specific areas of the yield curve, or a full government strategy like Vanguard Government Securities Active ETF, ticker VGVT.

Learn more:

Vanguard Multi-Sector Income Bond ETF

Vanguard Government Securities Active ETF

1 Source: Morningstar, as of May 31, 2025

Notes:

For more information about Vanguard funds and Vanguard ETFs®, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information 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.

Vanguard Multi-Sector Income Bond ETF is not to be confused with the similarly named Vanguard Multi-Sector Income Bond Fund. These products are independent of one another. Differences in scale, certain investment processes, and underlying holdings between the ETF and its mutual fund counterpart are expected to produce different investment returns by the products.

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. Past performance is no guarantee of future results.

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 issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

Bonds of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

High-yield bonds generally have medium- and lower-range credit-quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit-quality ratings.

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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