Active fixed income investments

Disclosures and footnotes

1 Analyst report on Vanguard Core Bond Fund, Morningstar, Inc., published August 30, 2024, based on data as of June 30, 2024.

Note: Vanguard Core Bond Fund earns a High Process Pillar rating. The primary contributor to the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar rating of 3.6 stars. The parent firm's five-year risk-adjusted success ratio of 71% also bolsters the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar risk-adjusted return for the period. Their respectable success ratio suggests that the firm does well for investors and that this fund may benefit from that. Strong risk-adjusted performance also supports the rating, as shown by the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Even when excluding risk from its performance record, the strategy still held up. This share class surpassed the category index over the past eight-year period, outperforming by an annualized 46 basis points. It has also beaten its average peer by an annualized 46 basis points over the same eight-year period.

Vanguard Core Bond ETF and Vanguard Core-Plus Bond ETF are not to be confused with the similarly named Vanguard Core Bond Fund and Vanguard Core-Plus Bond Fund. These products are independent of one another. Differences in scale, certain investment processes, and underlying holdings between the ETFs and their mutual fund counterparts are expected to produce different investment returns by the products.

2 Vanguard calculations, based on data from Morningstar, Inc., as of December 31, 2023, show that Vanguard active fixed income funds had an average asset-weighted expense ratio of 0.11%, compared with an average asset-weighted expense ratio of 0.54% for non-Vanguard active fixed income funds.

3 Vanguard and Morningstar, Inc., as of December 31, 2023. These are weighted expense ratios for actively managed fixed income funds.

4 The Sharpe ratio is calculated by dividing an investment’s return, minus the risk-free rate of return, by the standard deviation of returns for the investment. Higher numbers are better because they show a higher return for the amount of risk taken.

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.

For more information about Vanguard funds or Vanguard ETFs, view detailed product information or call 800-997-2798 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.

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. Past performance is not a guarantee of future results.

International investing is subject to additional risks, including the possibility that returns will be hurt by a decline in the value of foreign currencies or by unfavorable developments in a particular country or region.

Stocks and bonds of issuers 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.

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.

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.

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.

Vanguard is owned by its funds, which are owned by Vanguard’s fund shareholder clients.

© 2024 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

The Morningstar Rating™ for funds, or "star rating," is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a 3-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% 3-year rating for 36–59 months of total returns, 60% 5-year rating/40% 3-year rating for 60–119 months of total returns, and 50% 10-year rating/30% 5-year rating/20% 3-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent 3-year period actually has the greatest impact because it is included in all three rating periods.