Vanguard's new emerging markets bond active ETF: Going beyond

Advisors seeking to add income and diversification to client portfolios may want to consider the benefits of the new Vanguard Emerging Markets Bond Active ETF (VEMB).

VEMB will be managed by the same active team that manages the Vanguard Emerging Markets Bond Fund (Admiral™ Shares: VEGBX; Investor Shares: VEMBX)¹, which has a proven track record of success.

VEMB extends beyond the traditional opportunity set represented by emerging markets indexes. The three main investment categories for VEMB are:

1.  Hard-currency sovereigns, about 70% allocation: Sovereign-backed bonds in which coupons and principal are paid in U.S. dollars, euros, or another major developed market currency, which helps U.S. or global investors reduce exposure to declines in the host country currency. Traditional emerging markets indexes focus on this portion of the market.
2.  Emerging markets corporates, about 15% allocation: These bonds are typically issued by large, established companies, denominated in U.S. dollars or euros, usually at an interest rate higher than sovereign bonds.  
3.  Local-currency sovereigns, about 15% allocation: Bonds issued and paid in a host country’s currency. These securities can offer U.S. or global investors a diversification benefit and return potential that differs from U.S.-denominated bonds.

An experienced management team

Daniel Shaykevich, will be the lead portfolio manager for VEMB. Shaykevich has served as lead senior portfolio manager of the Vanguard Emerging Markets Bond Fund (VEMBX) for the past 10 years.

Shaykevich will be joined by Mauro Favini, portfolio manager, and Micah James, CFA, head of emerging markets research. Favini has served as a senior portfolio manager on VEGBX/VEMBX for the past seven years.

VEMBX’s 10-year track record has been consistent. Since inception through September 30, VEMBX has delivered twice the cumulative total return of its benchmark (96.6% to 48.2%). The fund outperformed its benchmark in 79% of rolling three-month periods and its peer-group average in 73% of those periods.² Its low expense ratio supported net returns.

VEMB will have the same investment process, risk management, and philosophy as VEGBX, but with a larger allocation to local-currency sovereign bonds. The ETF will come with a low 0.35% expense ratio, among the lowest costs for ETFs in the emerging markets bond category.²

A rising asset class

Emerging markets bonds have strengthened as an asset class in recent years:

Better credit. Emerging markets’ average credit rating has improved over the past 25 years, placing the asset class just within the investment-grade rating, according to data from J.P. Morgan EMBI Global, as of December 31, 2025.

Growing economies. Emerging markets countries have seen their economies grow. Figures from the International Monetary Fund (IMF) are projected  to show that emerging and developing economies in 2026 accounted for 42% of global gross domestic product.

Better debt profiles. Meanwhile, emerging markets government-debt-to-GDP ratios remain lower than ratios for advanced countries, where debt burdens have reached worrying levels. Emerging and developing markets sovereign debt stands at 76%, on average, of GDP, compared with 108% for advanced countries, IMF data show.

For investors, EM bonds can represent a strategic allocation. Deeper markets, broader issuance, and stronger policy frameworks have expanded the role of emerging markets bonds in professionally managed fixed income portfolios.

As it has matured, it has created a broader opportunity set for experienced active managers seeking excess returns through rigorous issuer research, analysis of macroeconomic drivers, and intentional risk management.

1 Vanguard Emerging Markets Bond Active ETF (VEMB) is a standalone product and is separate and distinct from the Vanguard Emerging Markets Bond Fund (VEGBX, VEMBX), a mutual fund. These products are independent of one another. Differences in scale, investment strategies, certain investment processes, and underlying holdings are expected to produce different investment returns by these products.

2 Vanguard, September 30, 2026. based on data from Morningstar, Inc., as of September 30, 2026; U.S. Fund Emerging Markets Bond Category. Benchmark is the J.P. Morgan EMBI Global Diversified Index.

Notes:

For more information about Vanguard funds, visit 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.

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.

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

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.