- The fund will invest in high-quality bonds, including a combination of money market, government, and investment-grade corporate securities with an expected average rating of Aa and duration of approximately one year
Vanguard has filed a registration statement with the U.S. Securities and Exchange Commission for Vanguard Ultra-Short-Term Bond Fund.
The new actively managed fund will round out Vanguard’s taxable bond fund lineup, which comprises 10 active funds and 12 index funds covering the broad quality and duration spectrum. The fund will invest in high-quality bonds, including a combination of money market, government, and investment-grade corporate securities with an expected average rating of Aa and duration of approximately one year.
“Vanguard Ultra-Short-Term Bond Fund is a low-cost and diversified option for investors seeking to augment the bond component of a balanced portfolio. It will afford investors the opportunity for further duration diversification,” said Vanguard CEO Bill McNabb. “The new fund, however, should not be used as a money market fund substitute, as it will subject investors to some level of principal risk.”
The fund, which is expected to be available in the first quarter of 2015, will offer low-cost Investor Shares and Admiral Shares. Investor Shares, with an estimated expense ratio of 0.20%, will require a minimum initial investment of $3,000. Admiral Shares, with an estimated expense ratio of 0.12%, will require a minimum initial investment of $50,000.
Gregory S. Nassour, CFA and David Van Ommeren, principals and senior portfolio managers in Vanguard Fixed Income Group, will co-manage the new fund. Mr. Nassour, who started at Vanguard in 1992, currently manages multiple investment-grade bond funds. Mr. Van Ommeren joined Vanguard in 1991 and is co-leader of the asset-backed and commercial mortgage-backed securities team.
Vanguard Fixed Income Group is one of the world’s largest fixed income managers, overseeing approximately $802 billion across 41 bond funds and 10 money market funds with $289 billion in actively managed bond funds, $340 billion in index funds and ETFs, and $173 billion in money market funds in the United States.
Vanguard has continued to expand its fixed income fund lineup to provide investors with options to further diversify their bond portfolios. Within the past two years, Vanguard has launched Vanguard Total International Bond Index Fund with current assets of $28.3 billion, Vanguard Short-Term TIPS Index fund, with current assets of $10.2 billion, and Vanguard Emerging Markets Government Bond Index Fund, with currents assets of $348 million.
Vanguard has experienced consistently strong cash flows into its bond funds and ETFs as investors continue moving towards low-cost active and index fixed income products. Through October, nearly $59 billion flowed into Vanguard’s U.S.-based fixed income products, including a record $10.3 billion in October.