| Vanguard Perspective

Active Fixed Income Perspectives: Q3 2021

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

Investors ratcheted credit spreads even tighter over the three months ended June 30, 2021. Interest rates pulled back from recent highs and bond returns were positive, but some bond market yields reached near-historic lows.

Looking ahead

We are watching for signs of sustained inflation, such as higher wages and a faster velocity of money. But demographics, technology, and a flexible Federal Reserve should ultimately keep inflation, and interest rates, under control.

Approach

We have lightened up on credit risk, collected excess return where we could, and otherwise stored proverbial dry powder. Broad-based opportunities targeting specific sectors, business models, or credit quality have largely dissipated. Outperformance for now will likely come from security selection.

Overview

Where do we go from here?

For many advisors and market professionals, the question remains, Where do we go from here? There have been enormous sums of money stacked up in the short end of the yield curve as many investors have been positioned to avoid the negative price impact of a large move higher in interest rates. Others have gone searching for yield in more obscure assets. We see neither of these, in the extreme, as the solution to a difficult market. Instead we prefer to be patiently opportunistic using a diversified set of strategies to add value.

Bond prices rose in the second quarter as the Federal Reserve turned more hawkish. Investors reasoned that the Fed would keep inflation reined in, putting downward pressure on yields. Credit responded well and spreads continued to narrow. While inflation remains a significant risk, it is hard to envision a scenario in which it runs unchecked by the Fed.

Value in duration

Bond yields continue to be persistently low and credit spreads are at or near historically tight levels. Nonetheless, there are fundamental reasons for current bond prices, and the market has factored in a reasonable path for rates.

Future returns may be more muted than in decades past, but in the near term, fixed income should generate positive returns with support from an improving global economy, accommodative fiscal and monetary policy, and favorable supply and demand. There is value in owning some duration exposure. As of June 30, the U.S. Treasury yield curve was steeper than it was a year prior, offering some term premium in higher-quality fixed income sectors. Our team takes some solace in that as we await better circumstances.

Taxable fixed income sector returns

This is a vertical bar chart showing taxable fixed income sector returns for the second quarter, as well as the first six months of 2021. For emerging markets (in USD), the second quarter return was 4.06%, and the year-to-date return was -0.66%. For U.S. corporates, the second quarter return was 3.55%, and the year-to-date return was -1.27%. For Treasury Inflation-Protected Securities, the second quarter return was 3.25%, and the year-to-date return was 1.73%. For U.S. high yield, the second quarter return was 2.74%, and the year-to-date return was 3.62%. For global aggregate credit, the second quarter return was 2.10%, and the year-to-date return was -1.04%. For U.S. Corporate Mortgage Backed Securities, the second quarter return was 1.87%, and the year-to-date return was -0.50%. For U.S. aggregate, the second quarter return was 1.83%, and the year-to-date return was -1.60%. For U.S. Treasury, the second quarter return was 1.75%, and the year-to-date return was -2.58%. For global aggregate, the second quarter return was 1.31%, and the year-to-date return was -3.21%. For U.S. Asset-Backed Securities, the second quarter return was 0.34%, and the year-to-date return was 0.18%. U.S. Mortgage-Backed Securities, the second quarter return was 0.33%, and the year-to-date return was -0.77%.

Sources: Bloomberg Barclays indexes and J.P. Morgan EMBI Global Diversified Index, as of June 30, 2021.

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

A hawkish turn

The Federal Open Market Committee (FOMC) surprised the market in June, when it reacted more hawkishly to incoming data. This effectively took the scenario of an inflation overshoot off the table. The market reacted accordingly by pricing rate hikes sooner and reduced term and inflation premia in the long end of the curve. In response, the yield curve flattened as the yield on the 10-year Treasury dove below 1.3% in early July.

In addition, strong technical factors came into play that exacerbated the move lower in yields. Low summer supply was outstripped by bond-buying at the longer end of the yield curve by banks and international investors.

Rising rates over time

We view rates as relatively range-bound in the near term, with some room to move gradually higher as the economy continues to recover and the Federal Reserve tapers purchases. Internationally, developed markets’ central banks are facing similar price pressures. In Europe, inflation is expected to fall back well below central bank targets likely keeping the European Central Bank’s monetary policy accommodative for an extended period.

The market had doubted the ability of the Fed to create inflation, and what we’ve seen is the Fed has the ability to be patient. We expect more guidance on the future tapering of asset purchases either at the Jackson Hole Economic Policy Symposium in August or at the September FOMC meeting.

Government rates: Second-quarter yield change by maturity (in basis points)

This is a series of bar graphs showing second-quarter yield change for U.S. Treasuries and sovereign bonds from the United Kingdom, Germany, and Australia. The yield curve shown includes the 1 year, 2 years, 5 years, 10 years, 20 years and 30 years. The graph shows that the yield German bunds increased slightly across the yield curve during the quarter, with the most notable increase at 10 years. U.S. Treasuries increased modestly at 2 years. All other yields decreased, with more substantial declines at 10 years and beyond. For example, Australian bond yields declined by 39 basis points at 20 years and 44 basis points at 30 years. U.S. Treasury bond yields declined by 29 basis points at 20 years and 33 basis points at 30 years.

Source: Bloomberg, data as of June 30, 2021.

Mortgage-backed securities

Greater supply of mortgage-backed securities (MBS) and reduced demand pushed spreads wider over the quarter. Although the sector was still able to generate a positive total return as interest rates declined, MBS underperformed similar-duration Treasuries. Mortgage borrowing costs remain low by historical standards, and housing activity is robust.

Net supply of MBS has increased significantly with over $400 billion coming in the first half of 2021 and estimates of $300 billion more expected over the second half of the year. The sector has been supported by the Fed's MBS purchases as well as demand, particularly from banks and international investors.

Underperformance expected

The Fed's hawkish turn in June was felt by the MBS market. Valuations cheapened slightly, but spreads are still historically tight. Higher-than-expected levels of interest rate volatility have been a headwind. When the Fed starts to taper, and as bank purchases start to slow, we expect MBS to underperform.

Relative to this time last year, the opportunities in the MBS market are less broad-based. We've reduced our exposure, but we still see value and diversification benefits in those parts of the market that offer relatively attractive yield with protection against prepayments.

Implications for Vanguard funds:

  • Maintaining duration exposure has proved valuable. We continue to seek out tactical rates opportunities along the yield curve.
  • The market's move to lower rates in early July was surprising. Over time we see yields moving gradually higher.
  • We remain underweight in MBS even as we seek to add value through selection in the sector.

Credit markets

Peak liquidity behind us

The outperformance of lower-quality bonds has been notable, driven mainly by investors seeking positive real returns in an economic recovery. The ability for this trend to persist is unlikely in our view.

While the pace of spread tightening slowed, credit sectors across the board were resilient in the face of the Fed's comments and generated positive excess returns over the quarter. The appetite for yield has continued to push those investors seeking higher returns further out on the risk spectrum.

Peak global liquidity and central bank support are likely behind us, which will also create a stronger headwind for lower-quality bonds.

We are constructive on credit, but many of the highest-quality names are priced too rich and lower-quality names are vulnerable to a change in sentiment. We've reduced our credit exposure, and we are focused on improving credit stories that have upside potential. Compared with roughly a year ago, overweights to specific sectors, business models, or credit-quality buckets offer little value in today's market.

Going forward, economic data and the Fed's reaction will drive markets. Yet we expect credit to remain well supported with substantial demand from a global investor base. Expensive valuations make us more cautious, and we hold ample liquidity to add exposure if prices adjust.

Credit spreads traded in a tight range over the quarter, after a dramatic compression last year

In basis points (bps), from June 30, 2020, through June 30, 2021

This is a series of seven line graphs showing credit spreads for emerging markets (USD) sovereigns, U.S. high yield, U.S. corporate, global aggregate credit, U.S. CMBS, U.S. ABS, and MBS from June 30, 2020, to June 30, 2021, in basis points. Each shows that credit-sector spreads compressed further in the second quarter of 2021, after a dramatic compression that began last year. Emerging markets (USD) sovereigns spread levels finished at 340; U.S. high-yield finished at 268; U.S. investment-grade corporate ended at 80; Global aggregate credit finished at 81; U.S. CMBS credit spread levels finished at 59 bps; U.S. ABS finished at 22; and MBS finished at 27 bps. Sources: Bloomberg Barclays indexes and J.P. Morgan EMBI Global Diversified Index, as of June 30, 2021.

Sources: Bloomberg Barclays indexes and J.P. Morgan EMBI Global Diversified Index, as of June 30, 2021.

Investment-grade corporates

High-quality corporate bonds, as measured by the Bloomberg Barclays U.S. Corporate Bond Index (+3.55%), rebounded last quarter, which helped to offset their first-quarter performance (–4.65%). The sector benefited from the decline in Treasury rates at the intermediate- and long-end of the curve and from spread tightening.

Corporates advanced during the first-quarter earnings reporting season, as a higher-than-average number of companies outpaced expectations and economic activity improved across industries. Our favorable allocations to cyclical sectors and lower-credit-quality investment-grade issuers provided a performance boost to our portfolios. But today most of the investment-grade sector is trading at historically expensive valuations, which leaves fewer opportunities for high-conviction bets.

Potential sources of outperformance

We expect to see a continuation of the record pace of share buybacks funded with debt as well as elevated merger and acquisition activity, both of which should result in new supply and potentially better investment opportunities later this year. As corporate fundamentals continue to improve, our investment-grade and high-yield teams are focused on identifying the best opportunities in "rising star" issuers poised to get upgraded by rating agencies to an investment-grade rating.

High-yield corporates

A record pace of issuance (more than $280 billion) through the first half of the year has not prevented spread levels on below-investment-grade issuers from continuing to narrow. That has occurred partly because most of the issuance was used for debt refinancing, so the net supply is in line with historical levels.

Little incentive in lower-quality bonds

The yield on CCC rated debt fell to 5.60%, its lowest level on record. The differential between below-investment-grade debt and investment-grade debt also continued to shrink, to 184 basis points, the lowest level since July 2007. Investors are simply not getting paid appropriately to go down in quality.
We see the best opportunities in a barbell approach to the sector. We are focused on rising stars and on COVID-19-affected companies that should benefit from the economic reopening, such as travel and leisure.

Emerging markets

Emerging markets (EM) debt outpaced the other major bond market sectors in the second quarter, as the J.P. Morgan Emerging Markets Bond Index (EMBI) Global Diversified produced a return of 4.06%, which helped to bring the asset class closer to even (–0.6%) for the six months. The decline in longer-maturity U.S. Treasury rates drove most of the performance, but credit spreads also managed to narrow by 14 basis points.

Nonetheless, while spreads remain compressed across the globe, EM debt is one place where there remains some relative yield, and increases in commodity prices can help. Lower-quality EM continued to outperform. Ecuador has been the strongest of the group so far this year because of low near-term financing needs, higher energy prices, and a new administration that has made progress toward fiscal reform. Our overweight to Ecuador has benefited our portfolios.

Pockets of value

Investment-grade EM debt was held back over the quarter by political events in higher-quality Latin American countries, most notably Chile, Colombia, and Peru. We've maintained an underweight to expensive, higher-quality countries, and this recent volatility has reinforced our view that investment-grade spreads leave little room for any unexpected credit deterioration. The EM market offers several pockets of value. A selective approach in lower quality is important, but its recent underperformance offers opportunities to add exposure to names we like.

Over the last few months, we've seen EM central banks turn more hawkish in the face of rising inflation. Brazil and Russia were among the first to raise policy rates to fight off increasing price pressures, and each increased rates during the quarter. Mexico surprised the market with a 25-basis-point hike, and Hungary and the Czech Republic became the first European Union countries to raise rates this cycle. We will take advantage of opportunities in EM rates in markets with steep curves or where the market appears to have priced in overly aggressive central bank policy.

Structured products

The new-issue market for asset-backed securities continues to be well oversubscribed by investors. Credit spreads for consumer-backed debt have been pushed below pre-global-financial-crisis levels by a good margin, highlighting just how expensive valuations are in the market today. On the positive side, consumers have put stimulus and savings to good use by continuing to pay off debt.

Spreads have continued to narrow for commercial mortgage-backed securities (CMBS), and we believe there’s room for further compression. The reopening of the broader economy should translate into lower delinquency rates and continued upside for issuers who were most negatively affected by the pandemic-induced shutdown.

While U.S. consumers remain financially strong, we are keeping a close eye on the health of the commercial property subsectors as the economic recovery intersects with new attitudes toward remote working. Creditworthiness within CMBS will depend on what the new normal looks like.

Implications for Vanguard funds:

  • Rising commodity prices and wider credit spreads make EM one of the few areas in which to more broadly find attractive returns. Opportunities to add value persist, but we are mindful that EM central banks have much less flexibility to support a recovery.
  • The upside is limited among high-yield and investment-grade corporate bonds, but fundamentals are strong and yields relative to Treasuries are attractive. Performance in those sectors will be driven by individual security selection.
  • We remain cautiously constructive on CMBS. Harder-hit segments, like office, hotel, and retail properties, continue to recover.

Municipal bonds

A steeper curve to come

In a similar pattern to Treasuries, the muni yield curve flattened over the quarter. Short-maturity yields inched higher while yields further along the curve declined, falling more than 20 basis points at the long end. The pullback represented a reversal of the sharp rise in rates experienced earlier this year and helped to boost returns for the quarter. Looking forward, we see a gradual path toward modestly higher muni rates and a steeper curve overall as economic activity returns to full strength.

The ratio of muni yields to Treasuries is less attractive by historical standards, but much could be said about many of the traditional measures of "rich versus cheap" for all asset classes in today's market. For munis, remember that the ratio compares a AAA rated 5% coupon muni bond against its comparable-maturity Treasury. In reality, those securities represent less than 10% of the broader municipal bond market. Investors in a diversified muni bond fund naturally gain exposure to a broader spectrum of credit quality, which makes the muni/Treasury ratio an important, but conservative, metric.

Infrastructure shouldn't disrupt the market

Progress toward some form of U.S. infrastructure legislation may continue to crowd headlines over the summer, but much still needs to be determined. The most recent Bipartisan Infrastructure Framework proposal identifies $579 billion of new spending that would target transportation and other traditional infrastructure areas. Many sources of funding have been proposed, but there has been little detail offered on what path they might take and what other concurrent, and less traditional, infrastructure proposals may be presented alongside them.

If additional tax-exempt supply were to result from any approved legislation, investor demand would likely absorb it. If revenue from higher personal and/or corporate tax rates were part of the plan to help pay for the projects, demand for munis would likely increase on the margin. Therefore, we don't foresee large market disruptions from what's currently been proposed, but we expect to gain more clarity over the coming months.

Muni/Treasury ratio

  2 Years 5 Years 10 Years 20 Years 30 Years
U.S. Treasury Yield 0.25% 0.89% 1.47% 2.02% 2.09%
Municiple Market Data AAA Curve 0.16% 0.49% 0.99% 1.32% 1.50%
Ratio 0.64% 0.55% 0.67% 0.65% 0.72%

Sources: Vanguard and Bloomberg, as of June 30, 2021.

Municipal credit is well supported

As we highlighted last quarter, the stimulus funds provided by the COVID-19 relief bill and the American Rescue Plan Act undergirded municipal credit fundamentals. Longer-term fiscal reforms remain important for certain issuers, but over the near term, we are constructive on credit across most market segments.

The support for credit helped fuel the ongoing reach for yield and the outperformance of both lower-quality and longer-maturity segments of the market over the quarter. Credit spreads continued to compress and are now at or below their pre-pandemic levels.

Over the last several months, we benefited from attractive opportunities in lower-quality credit that had yet to fully recover. As that segment has continued to outperform, we've pared down exposures for which our assessment of the upside is now more limited.

While we believe credit is well-supported, rich valuations mean that the key performance drivers over the next few months will be issuer and security selection.

Implications for Vanguard funds:

  • A material increase in muni rates is unlikely, but we are positioned for higher rates and a steeper curve.
  • We are constructive on credit but believe spreads dictate a conservative approach. We hold ample liquidity in the hope of better opportunities to add risk.

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%
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 0.45%
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 Municipals

    Paul Malloy

    Paul Malloy, CFA
    Head of 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 Fixed Income Specialist

    Dan Larkin

    Dan Larkin
    Senior Fixed Income Specialist


    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.

  • Katy Righi, senior product manager, taxable bonds

    Katy Righi, CFA
    Senior Fixed Income Specialist

    Katy Righi, senior product manager, taxable bonds

    Katy Righi, CFA
    Senior Fixed Income Specialist


    Katy Righi, CFA, is a senior fixed income product manager in Vanguard Portfolio Review Department, which oversees Vanguard's product lineup. She provides specialized expertise in support of Vanguard's active taxable mutual fund offerings. This includes monitoring fund positioning and performance, communicating fund-specific information both internally and externally, and driving and implementing product improvements.

    Prior to her current role, Ms. Righi worked as a trader in Vanguard Fixed Income Group for both the active Treasury fund suite and the global foreign exchange desk.

    Ms. Righi earned an M.B.A. from the Kellogg School of Management at Northwestern University and a B.A. from Williams College. A CFA® charterholder and member of the CFA Society of Philadelphia, she also holds FINRA Series 7 and 63 licenses.

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 Municipals

    Paul Malloy

    Paul Malloy, CFA
    Head of 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.

  • Manish Nagar

    Manish Nagar
    Global Head of Risk Management Group

    Manish Nagar

    Manish Nagar
    Global Head of Risk Management Group


    Manish Nagar is a principal and the global head of Vanguard Risk Management Group, a subdivision of Global Risk and Security, responsible for the execution, coordination, and evolution of the company's risk and quantitative processes across all global markets. Prior to this role, Mr. Nagar was global head of investment risk; prior to that, he was head of risk management in Europe, where he was responsible for investment and operational risk oversight of the U.K. and Irish fund range. Mr. Nagar joined Vanguard in 2000 and has held various positions of increasing responsibility within the Planning and Development, Information Technology, and Investment Management Divisions, along with numerous special assignments.

    Mr. Nagar earned a bachelor's degree in electronics and communication engineering from Bangalore University, in India, and an M.B.A. from Rutgers University, in the United States. A graduate of the Executive Masters in Technology Management (EMTM) program at the University of Pennsylvania (co-sponsored by The Wharton School), he also completed the Advanced Leadership Program at the Stanford University Graduate School of Business and attended the Investment Management Workshop at Harvard Business School.

Active fixed income at Vanguard

  • $282B

    Taxable bond AUM
    14 funds*

  • $222B

    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 June 30, 2021.

Notes:

  • For more information about Vanguard funds or Vanguard ETFs, obtain a prospectus (or a summary prospectus, if available) or call 800-523-1036 to request one. 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.
  • 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.