Vanguard has added to its VUS-domiciled active fixed income fund offering with the addition of the Vanguard Emerging Markets Bond Fund. The new fund takes the range to 25 funds and complements the firm’s existing emerging markets bond index offering.
The new fund is designed to offer financial advisors and institutions the potential for additional diversification, along with potentially higher returns that can accompany the considerable volatility associated with emerging markets debt.
The fund’s investment advisor, Vanguard Fixed Income Group, seeks to outperform the JP Morgan EMBI Global Diversified Index by investing in a broadly diversified portfolio of debt issued by emerging market governments and government-owned enterprises, with a majority of its assets either denominated in, or hedged back to, the US dollar. Emerging market countries include countries whose economies and capital markets are less developed, which includes most countries except for Australia, Canada, Japan, New Zealand, the United States, the United Kingdom, and most European Monetary Union countries. The Fund also has the ability to invest, on a limited basis, in out-of-benchmark emerging market sectors, such as emerging market corporate bonds and local currency bonds. The Fund’s duration, a measure of interest rate risk, is expected to be within one year of its benchmark.
“Emerging market debt is a well-established asset class offering credit exposure and diversification that is complementary to corporate and high yield bonds,” says John Hollyer (pictured), global head of Vanguard Fixed Income Group. “The Fund provides investors with low-cost, broad exposure to emerging fixed income markets.”
The Emerging Markets Bond Fund is among the lowest-cost actively managed funds in its category, with the Fund’s Investor and Admiral shares (VEMBX and VEGBX) featuring expense ratios of 0.60 per cent and 0.45 per cent, respectively.
The new actively managed fund serves as a complement to Vanguard’s corresponding index and ETF offering, Vanguard Emerging Markets Government Bond Index Fund, which was introduced in 2013. Investors now have a choice between both active and passive products that provide access to emerging market debt, which may be suitable to some investors based on their goals, preferences, and tolerance for risk.