| Vanguard Perspective

Active Fixed Income Perspectives Q4 2022: Tenacity through turmoil

Vanguard Active Fixed Income Perspectives is our quarterly in-depth commentary. It offers a sector-by-sector analysis and a summary of how those views affect the Vanguard active bond funds.

Key highlights

Performance

Central banks globally—and especially the Federal Reserve—continue to hoist rates to combat broad-based inflation, which has driven a historically bad year for bonds. Credit spreads have held mostly steady.

Looking ahead

We are not confident that we have seen the peaks in U.S. Treasury rates. Nonetheless, higher yields mean bonds look better going forward. Credit spreads have room to widen further, but the extra income can better absorb market turbulence. A recession is likely next year. We see a more mild version, but the trajectory of inflation will dictate how restrictive monetary policy will need to go.

Approach

We believe the most prudent approach is to focus on a core allocation to higher-quality securities that are less sensitive to a weakening global economy. As a complement to that, elevated market volatility has created more dispersion and better entry points in select lower-quality bonds.

Overview

The best and worst of times

After years of easy monetary policy, central banks now compete on interest rate hikes. Inflation was said to be transitory; now it’s everywhere. Rising, and attractive, bond yields contrast with tumbling prices and capital losses. Cash positions are flush as fixed income markets struggle with liquidity.

This is a time of record-low U.S. unemployment, climbing tax receipts, and, for some, the highest wage increases in a generation. Yet the arrival of a recession appears inevitable. A hard winter, and perhaps a widening war across Europe, awaits.

The COVID-19 pandemic led to unprecedented stimulus, which concluded an era of ever lower interest rates and a bull market in bonds that stretched back to 1981. For fixed income, it was the best of times.

Now, central banks have been forced to tighten quickly, which has upended markets. Investors fear the Fed. The situation is worthy of Charles Dickens.

Bonds look better

Policymakers have made it abundantly clear that little else matters until price stability is attained, which means near-term volatility is likely. However, the risk-reward profiles of various market sectors—including Treasuries, corporates, emerging markets, and long-term municipals—are more attractive than they were six months ago.

Ironically, the worse returns get, the better bonds should look in the future. Investors need tenacity through turmoil. Ever higher coupons have changed expected return calculations and brought back bonds’ long-established use case.

Comparing the dividend yield on the S&P 500 against Treasuries shows just how far we’ve come this year. For investors who have added new, more esoteric positions in search of yield or uncorrelated assets such as private credit, it seems a good time to reconsider old-fashioned long-term asset allocation.

Bond yields blow past dividend yields

This line chart shows the yields of the Bloomberg U.S. Corporate Bond Index and the 10-year Treasury note and expected forward dividend of the companies in the S&P 500 Index. As of September 30, 2022, the U.S. Corporate Bond Index yield stood at 5.69%, the 10-year Treasury yield was 3.80%, and the forward dividend estimate for the S&P 500 was at 1.90%.

Sources: FactSet, as of September 30, 2022.

Fixed income sector returns and yields

This bar chart shows taxable fixed income sector returns for the third quarter and year-to-date through September 2022. Emerging markets bonds fared the worst, with a –24% return through September, followed by global aggregate bonds, with a –20% return. U.S. ABS performed the best, with a return of –5% through September. However, emerging markets and U.S. high yield bonds both have yields to worst near 10%.

Sources: Bloomberg indexes and J.P. Morgan EMBI Global Diversified Index, as of September 30, 2022.

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

Rates and inflation

Not that long ago, many observers wondered if the 10-year Treasury would ever crack 2% again; now it hovers around 4%. We expect the federal funds rate to peak at or above 4.5% in the first quarter of the year and to largely remain there throughout 2023.

When inflation cools, we see more stability in interest rates. The Fed will slow its pace of rate hikes, and we’ll see weakening in the labor market. With that, there will be a stronger case to add duration exposure, which should prove valuable in a weak economic backdrop and when an eventual pivot toward rate cuts occurs.

Global rates ante

Outside the U.S., there are still some risks to developed markets rates. There could be fresh inflation shocks or events, as recently seen in the United Kingdom, where governments work at cross-purposes with monetary authorities. U.K. gilts returned –13.6% for the quarter.

Central bank rates should hit 2.5% in the euro zone, 3.5% in Australia, and 5% in the U.K. in 2023. Asian central banks were late to begin hiking, and they will be compelled to meet the global rates ante or it will be difficult to defend their currencies.

Negative rates are nearly a thing of the past now; they can be found only in Japan, where the central bank is still trying to whip up more inflation.

The inversion between the 2-year and 10-year Treasury yields has some investors spooked, as many believe it’s an early sign of a recession. Recent history, however, has shown that bond investors have done well in the two years after an inversion has occurred.

Returns on the Bloomberg U.S. Aggregate Bond Index after 2-year and 10-year U.S. Treasury yields inverted

A bar chart shows the 1-year and 2-year cumulative returns of Bloomberg U.S. Aggregate Bond Index following an inversion of the yield curve. The 1-year and 2-year cumulative return periods begin the month following the listed month of inversion. Each 1-year and 2-year period exhibits a positive return, with 1-year performances ranging from 3.2% (July 1998–June 1999) to 13.4% (March 2000–February 2001) and 2-year performances ranging from 6.4% (September 2019–August 2021) to 22.1% (March 2000–February 2002). The months when inversions occurred are June 1998, February 2000, December 2005, June 2006, May 2007, and August 2019.

Note: Returns shown measure the 1-year and 2-year cumulative performance of the Bloomberg U.S. Aggregate Bond Index starting the month after the listed inversion dates.

Source: Vanguard, using Bloomberg data through September 30, 2022.

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

Government rates: Change in yield curve over the third quarter

This line chart shows how the government yield curves for the United States, United Kingdom, and Germany ended the third quarter, compared with the end of the second quarter. For each country, the yield curve ended higher than, and about as flat as, the quarter before. The 10-year Treasury, for example, ended the third quarter at 3.83%, up from 3.02% at the end of June 2022. The 10-year gilt, from the U.K., yielded 4.08%, compared with 2.23% the quarter before. The 10-year German bund yielded 2.10%, up from 1.33% last quarter. Each yield curve includes securities with durations of 1 year, 2 years, 5 years, 10 years, 20 years, and 30 years. The curves all rose across all points.

Source: Bloomberg, as of September 30, 2022.

Mortgage-backed securities

A knock-on effect of higher Treasury rates has been a dramatic increase in mortgage rates, which recently hit 16-year highs of near 7%. As a result, housing affordability has plummeted, and a huge majority of mortgage borrowers can no longer benefit from refinancing their existing loan.

Meanwhile, two of the largest buyers of mortgage-backed securities (MBS) have stepped away from the market: The Fed is trying to reduce its balance sheet, and commercial banks pulled back their purchases because of high volatility.

This means the marginal buyer for MBS today is more conscious of both absolute and relative valuations. MBS pricing has adjusted and become more attractive. This year we’ve moved from an underweight position in MBS to a modest overweight. We see pockets of value in higher-coupon on-the-run securities and in select collateralized mortgage obligations and agency CMBS sectors.

Implications for Vanguard funds:

  • Active duration and curve positioning offer less upside until we’re closer to the end of the hiking cycle. Once there, rate cut expectations should cause the curve to steepen.
  • MBS valuations have become more attractive, but a drop-off in investor demand warrants a selective approach.

Credit markets

Uncertainty around inflation and the rising probability of a recession have pushed spreads wider all year long. Nonetheless, strong credit fundamentals, lighter new issuance, and periods of opportunistic buying have helped keep spreads within a range.

We added credit risk in midsummer when market pessimism had pushed spreads to cheap levels. Since then, we’ve been more conservatively positioned for what we believe will be a bumpy road ahead.

We’re keeping overall credit exposure low while looking for bargains in segments of the market that overcorrect. While we may be closer to the highs in rates, we are mindful that if a recession occurs next year, credit spreads have room to increase further.

Credit spreads mostly held steady in third quarter

(in basis points, from September 30, 2021, through September 30, 2022)

This is a series of seven line graphs showing credit spreads in basis points for fixed income sectors from September 30, 2021, through September 30, 2022. Credit-sector spreads widened dramatically in the first half of 2022 and remained steady in the third quarter. Emerging markets sovereigns finished the third quarter at 559 basis points, U.S. high yield at 552 basis points, and U.S. corporates at 159 basis points.

Sources: Bloomberg indexes and J.P. Morgan EMBI Global Diversified Index, as of September 30, 2022.

Investment-grade corporates

The spread widening in high-grade corporates this year has been orderly. Spreads have stayed within a range of 30 basis points (bps) since the end of April, but they seem destined to break higher with the Fed communicating a more aggressive stance. We view today’s valuations as cheap, but clouded by the macroeconomic backdrop.

We have focused on the higher-quality, defensive segments of the sector. We’ve seen some weakening in consumers and more cautious guidance from companies.

Many corporations still sport strong balance sheets because they have been more disciplined than in prior cycles. Outside of a substantial market downturn, we see a low likelihood of a large downgrade wave.

Opportunities in Europe

The continued strength of the dollar is putting pressure on the profit margins of companies with global revenue streams and has pushed many overseas buyers away. In Europe, valuations reflect recession levels, which provides some credit opportunities in companies better positioned to navigate the slowdown in growth.

High-yield corporates

The question in the high-yield market today is whether the cup is half empty or half full. On one hand, credit spreads 500 bps above Treasuries would not normally be viewed as attractive this late in the cycle. However, the sector’s 9.50% yield and average dollar price of $85 both indicate the sector is cheap relative to history.

The high-yield market has gone through several default cycles over the last decade, which has left the sector more resilient. Still, today’s spread levels do not provide adequate compensation to justify a broad overweight.

Our preference is for higher-quality tranches. We are overweight BBs, underweight Bs, and cautious in CCC rated issues. We also see opportunities to capture attractive carry in select high-yield loans. Security selection will be the most important driver of performance in the coming quarters.

Emerging markets

In absolute terms, emerging markets (EM) credit suffered heavy losses this year. While the majority of the negative return is attributed to rising U.S. Treasury yields, the move in credit spreads has further contributed to the downside.

EM was hurt by Russia’s invasion of Ukraine and has remained under pressure throughout the year because of concerns over global growth and investor outflows.

While we are cautious for now, we believe a lot of negative news has already been priced in. With higher yields generating substantial carry for EM investors, as well as reduced new issue supply and attractive valuations, we see potential for strong returns over the coming year.

EM returns can also benefit from opportunities in local markets and EM corporate bonds. EM central banks began their hiking cycles more than a year ago and most should conclude by year-end. As we get closer to the end of the Fed’s hiking cycle, we expect to see additional opportunities in local-market EM rates.

EM currency exposure will offer pockets of value if the dollar weakens. Many EM corporate issuers retain industry-leading balance sheets and are in a position to retire debt at discount levels, potentially improving their credit profile.

Implications for Vanguard funds

• Credit valuations have steadily improved, but spreads have room to back up if the economy slows. We are keeping overall exposure low and looking for opportunities when markets overshoot fair value.

• We see the best opportunities in more defensive sectors of the corporate market and higher-quality EM sovereigns. An up-in-quality tilt should provide more cushion

Municipal bonds

The highest yields in over a decade

Municipal yields rose alongside most other fixed income sectors; as of September 30, the Bloomberg Municipal Bond Index yielded 4.04%, an offer not seen in over a decade.

Municipals look particularly attractive when compared with other sectors on a tax-equivalent basis. The 6.8% tax-equivalent yield for the broad municipal index is a full percentage point higher than the lower-rated U.S. investment-grade corporate market. Investors in top tax brackets living in certain states can access yields more comparable with those of U.S. high yield. These yields should be placed in context with municipals exhibiting the best credit fundamentals seen in the last 20 years, as discussed last quarter.

Investors who are waiting for a bottom face snapback risk. Crossover buyers (e.g., banks and insurance companies) may buy into attractive valuations, which historically has spurred rallies that retail investors pile into. Investors are often best suited to stay invested over the long term.

Scant default rates

The current value stands out even further when historical default rates are considered. Investment-grade municipals have experienced a 0.09% cumulative default rate on average over rolling 10-year periods, compared with 2.17% for global investment-grade corporates and 29.92% for global high yield. (All rates per Moody’s, using data from 1970 through 2021.)

Higher quality at attractive levels

With a potential recession in view, we are buying higher-quality municipal bonds at these attractive levels. Correspondingly, we are adding to all-weather sectors like water and sewer, toll roads, and higher-rated state, city, and local general obligation debt.

Holding a barbell

We are mostly neutral in duration while our funds concurrently hold a barbell position, with larger amounts of both cash and longer-maturity issues. Municipal bonds get steadily cheaper further out the curve, with 30-year AAA bonds yielding more than federally taxable U.S. Treasuries. When fund inflows resume and spark a rally, our excess cash positions can be used to extend our exposure into the market.

Tax-equivalent yields stand tall

A bar chart shows the yield-to-worst of select taxable fixed income indexes compared with the tax-equivalent yields of municipal bond indexes. The broad municipal bond index has a tax-equivalent yield of 6.8%, while the California Municipal Index has a tax-equivalent yield of 8.4% and the New Jersey Municipal Index has a tax-equivalent yield of 8.9%. Meanwhile, U.S. corporates are yielding 5.7% and U.S. high yield corporate bonds yield 9.7%.

Notes: Tax-equivalent yield is calculated using a 40.8% tax bracket, which includes a 37.0% top federal marginal tax rate and a 3.8% net investment income tax to fund Medicare. The California and New Jersey tax-equivalent yield calculations include the highest state income tax bracket in those states.

Sources: Bloomberg indexes, using yield-to-worst data as of September 30, 2022.Source: Bloomberg, as of June 30, 2022.

AAA muni/Treasury ratio

2 year

5 year  

10 year  

30 year

72%

77%

85%

105%


Source: Bloomberg, as of September 30, 2022.

Implications for Vanguard funds:

  • We favor remaining higher in quality as the Fed continues to tighten credit conditions. These bonds represent value while also helping to stabilize portfolios in a recession.
  • The worst of rising yields is likely behind us. Investors with longer-term horizons for their municipal allocations should consider going long, where bonds are particularly cheap.

Vanguard active bond funds or ETFs

  Admiral™ Shares or ETF ticker symbol Expense ratio1
TREASURY/AGENCY
GNMA2 VFIJX 0.11%
Inflation-Protected Securities VAIPX 0.10%
Intermediate-Term Treasury VFIUX 0.10%
Long-Term Treasury VUSUX 0.10%
Short-Term Federal VSGDX 0.10%
Short-Term Treasury VFIRX 0.10%
INVESTMENT-GRADE CORPORATE
Core Bond VCOBX 0.10%
Core-Plus Bond VCPAX 0.20%
Intermediate-Term Investment-Grade VFIDX 0.10%
Long-Term Investment-Grade2 VWETX 0.12%
Short-Term Investment-Grade VFSUX 0.10%
Ultra-Short-Term Bond VUSFX 0.10%
Ultra-Short Bond ETF VUSB 0.10%
BELOW-INVESTMENT-GRADE
High-Yield Corporate2 VWEAX 0.13%
GLOBAL/INTERNATIONAL
Emerging Markets Bond VEGBX 0.40%
Global Credit Bond VGCAX 0.25%
VANGUARD ACTIVE MUNICIPAL BOND FUNDS
NATIONAL MUNICIPAL
Short-Term Tax-Exempt VWSUX 0.09%
Limited-Term Tax-Exempt VMLUX 0.09%
Intermediate-Term Tax-Exempt VWIUX 0.09%
Long-Term Tax-Exempt VWLUX 0.09%
High-Yield Tax-Exempt VWALX 0.09%
STATE MUNICIPAL
California Intermediate-Term Tax-Exempt VCADX 0.09%
California Long-Term Tax-Exempt VCLAX 0.09%
Massachusetts Tax-Exempt3 VMATX 0.13%
New Jersey Long-Term Tax-Exempt VNJUX 0.09%
New York Long-Term Tax-Exempt VNYUX 0.09%
Ohio Long-Term Tax-Exempt3 VOHIX 0.13%
Pennsylvania Long-Term Tax-Exempt VPALX 0.09%

1 As reported in each fund’s prospectus. A fund’s current expense ratio may be higher or lower than the figure shown.

2 Investment advisor: Wellington Management Company LLP.

3 Investor Shares available only. There is no minimum investment required for advised clients.

Active fixed income research team

  • Sara Devereux

    Sara Devereux
    Global Head of Fixed Income Group

    Sara Devereux

    Sara Devereux
    Global Head of Fixed Income Group


    Sara Devereux is a principal and global head of Fixed Income Group. Ms. Devereux has oversight responsibility for investment activities within the rates-related sectors of the taxable fixed income market including foreign exchange. Prior to joining the firm, Ms. Devereux was a partner at Goldman Sachs, where she spent over 20 years in mortgage-backed securities and structured product trading and sales. Earlier in her career, she worked at HSBC in risk management advisory and in interest rate derivatives structuring. Ms. Devereux started her career as an actuary at AXA Equitable Life Insurance. Ms. Devereux earned a B.S. in mathematics from the University of North Carolina at Chapel Hill and an MBA from the Wharton School of the University of Pennsylvania.

  • Christopher Alwine

    Christopher Alwine, CFA
    Global Head of Credit and Rates

    Christopher Alwine

    Christopher Alwine, CFA
    Global Head of Credit and Rates


    Christopher Alwine is global head of Credit and Rates, where he oversees portfolio management and trading teams in the United States, Europe, and Asia-Pacific for active corporate bond, structured product, and emerging markets bond portfolios. He joined Vanguard in 1990 and has more than 20 years of investment experience.

    Mr. Alwine was previously head of Vanguard's Municipal Group. There, he led a team of 30 investment professionals who managed over $90 billion in client assets across 12 municipal bond funds. He has served in multiple roles throughout his career in the Fixed Income Group. His experience includes trading, portfolio management, and credit research. Mr. Alwine's portfolio management experience spans both taxable and municipal markets, as well as active and index funds. He is also a member of the investment committee at Vanguard that is responsible for developing macro strategies for the funds.

    Mr. Alwine earned a bachelor's degree in business administration from Temple University and an M.S. in finance from Drexel University. He holds the Chartered Financial Analyst® certification.

  • Paul Malloy

    Paul Malloy, CFA
    Head of U.S. Municipals

    Paul Malloy

    Paul Malloy, CFA
    Head of U.S. Municipals


    Paul Malloy is head of municipal investment at Vanguard. Previously, he was head of Vanguard Fixed Income Group, Europe. In this role, Mr. Malloy managed portfolios that invested in global fixed income assets. He also oversaw Vanguard's European Credit Research team. Mr. Malloy joined Vanguard in 2005 and the Fixed Income Group in 2007 and has held various portfolio management positions in Vanguard's offices in the United Kingdom and the United States. In past roles, he was responsible for managing Vanguard's U.S. fixed income ETFs as well as overseeing a range of fixed income index mutual funds.

    Mr. Malloy earned an M.B.A. in finance from the Wharton School of the University of Pennsylvania and a B.S. in economics and finance from Saint Francis University. He is a CFA® charterholder.

  • Dan Larkin

    Dan Larkin
    Senior Investment Specialist—Active

    Dan Larkin

    Dan Larkin
    Senior Investment Specialist—Active


    Dan Larkin joined Vanguard in 2016 as a senior product manager in Vanguard Portfolio Review Department, where he is responsible for supporting the active taxable fixed income product lineup, including: monitoring each fund’s positioning and performance in the markets, communicating about our products internally and externally, and driving and implementing product improvements.

    Before joining Vanguard, Mr. Larkin was the director of fixed income for Nationwide Financial's Manager Research Team and was charged with the oversight and manager search efforts for all of Nationwide's sub-advised fixed income mutual fund strategies. Previously, he was a vice president at Barclays Capital responsible for the Mid-Atlantic business of Barclays portfolio management platform, POINT. There he worked with large institutional clients and was responsible for new business development, portfolio analysis, and relationship management. Prior to his time at Barclays, he was a mortgage-backed securities analyst at Standard & Poor's.

    Mr. Larkin earned a B.B.A. in finance at James Madison University.

Active fixed income leadership team

  • Sara Devereux

    Sara Devereux
    Global Head of Fixed Income Group

    Sara Devereux

    Sara Devereux
    Global Head of Fixed Income Group


    Sara Devereux is a principal and global head of Fixed Income Group. Ms. Devereux has oversight responsibility for investment activities within the rates-related sectors of the taxable fixed income market including foreign exchange. Prior to joining the firm, Ms. Devereux was a partner at Goldman Sachs, where she spent over 20 years in mortgage-backed securities and structured product trading and sales. Earlier in her career, she worked at HSBC in risk management advisory and in interest rate derivatives structuring. Ms. Devereux started her career as an actuary at AXA Equitable Life Insurance. Ms. Devereux earned a B.S. in mathematics from the University of North Carolina at Chapel Hill and an MBA from the Wharton School of the University of Pennsylvania.

  • Christopher Alwine

    Christopher Alwine, CFA
    Global Head of Credit and Rates

    Christopher Alwine

    Christopher Alwine, CFA
    Global Head of Credit and Rates


    Christopher Alwine is global head of Credit and Rates, where he oversees portfolio management and trading teams in the United States, Europe, and Asia-Pacific for active corporate bond, structured product, and emerging markets bond portfolios. He joined Vanguard in 1990 and has more than 20 years of investment experience.

    Mr. Alwine was previously head of Vanguard's Municipal Group. There, he led a team of 30 investment professionals who managed over $90 billion in client assets across 12 municipal bond funds. He has served in multiple roles throughout his career in the Fixed Income Group. His experience includes trading, portfolio management, and credit research. Mr. Alwine's portfolio management experience spans both taxable and municipal markets, as well as active and index funds. He is also a member of the investment committee at Vanguard that is responsible for developing macro strategies for the funds.

    Mr. Alwine earned a bachelor's degree in business administration from Temple University and an M.S. in finance from Drexel University. He holds the Chartered Financial Analyst® certification.

  • Joe Davis

    Joe Davis
    Vanguard Global Chief Economist

    Joe Davis

    Joe Davis
    Vanguard Global Chief Economist


    Joseph Davis, Ph.D., a Vanguard principal, is the global chief economist and global head of Vanguard Investment Strategy Group, whose research and client-facing team develops asset allocation strategies and conducts research on the capital markets, the global economy, portfolio construction, and related investment topics. Mr. Davis also chairs the firm's Strategic Asset Allocation Committee for multi-asset-class investment solutions. As Vanguard's chief economist, Mr. Davis is a member of the senior portfolio management team for Vanguard Fixed Income Group. He is a frequent keynote speaker, has published white papers in leading academic and practitioner journals, and helped develop Vanguard Capital Markets Model® and the firm's annual economic and capital markets outlook. Mr. Davis earned his B.A. summa cum laude from Saint Joseph's University and his M.A. and Ph.D. in economics at Duke University.

  • Paul Malloy

    Paul Malloy, CFA
    Head of U.S. Municipals

    Paul Malloy

    Paul Malloy, CFA
    Head of U.S. Municipals


    Paul Malloy is head of municipal investment at Vanguard. Previously, he was head of Vanguard Fixed Income Group, Europe. In this role, Mr. Malloy managed portfolios that invested in global fixed income assets. He also oversaw Vanguard's European Credit Research team. Mr. Malloy joined Vanguard in 2005 and the Fixed Income Group in 2007 and has held various portfolio management positions in Vanguard's offices in the United Kingdom and the United States. In past roles, he was responsible for managing Vanguard's U.S. fixed income ETFs as well as overseeing a range of fixed income index mutual funds.

    Mr. Malloy earned an M.B.A. in finance from the Wharton School of the University of Pennsylvania and a B.S. in economics and finance from Saint Francis University. He is a CFA® charterholder.

  • Kaitlyn Caughlin, Global Head of Vanguard IMG Risk Management

    Kaitlyn Caughlin, CFA
    Global Head of Vanguard IMG Risk Management

    Kaitlyn Caughlin, Global Head of Vanguard IMG Risk Management

    Kaitlyn Caughlin, CFA
    Global Head of Vanguard IMG Risk Management


    Kaitlyn Caughlin is a principal and global head of Vanguard IMG Risk Management, which provides independent risk oversight and advice to Vanguard Investment Management Group, helps minimize operational risk exposures within the investment process, and helps minimize transaction costs during the investment process.

    Prior to her current role, Ms. Caughlin was head of Vanguard Portfolio Review Department, which is responsible for overseeing Vanguard's 400-plus mutual funds, ETFs, and their advisors. The department is also responsible for developing the optimal fund lineup for investors, as well as analyzing the health, usage, and competitive landscape of Vanguard's funds and ETFs and supporting clients and crew by serving as specialized product experts. Her diverse career at Vanguard also includes previous roles in Product Strategy, Flagship Services, Corporate Strategy, Business Development, and Vanguard's Center for Excellence.

    Ms. Caughlin earned a B.A. in mathematics and mathematical economics from Pomona College and an M.B.A. from the MIT Sloan School of Management. A CFA® charterholder, she also holds the Certified Financial Planner™ designation.

Active fixed income at Vanguard

  • $227B

    Taxable bond AUM
    16 funds/ETF*

  • $199B

    Municipal bond AUM
    5 national funds/7 state-specific funds

  • 25+

    Portfolio managers

  • 35+

    Traders

  • 60+

    Credit research analysts

  • 130+

    Dedicated team members

*Includes funds advised by Wellington Management Company LLP.
Note: As of September 30, 2022.

Notes:

  • For more information about Vanguard funds or Vanguard ETFs, visit vanguard.com 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.
  • Past performance is no guarantee of future results. All investing is subject to risk, including possible loss of principal. Diversification does not ensure a profit or protect against a loss.
  • 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.
  • 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 are subject to risks including country/regional risk and currency risk.
  • Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund’s trading or through your own redemption of shares. For some investors, a portion of the fund’s income may be subject to state and local taxes, as well as to the federal Alternative Minimum Tax.
  • 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.
  • CFA® is a registered trademark owned by CFA Institute.