Vanguard today 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.1 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.2
“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.”
Vanguard offers a series of actively-managed money market and investment-grade bond funds for investors, financial advisors, and institutional investors, as shown in the accompanying table.
| Fund (inception date) | Assets | Average | Average | Expense Ratio | ||||||
| Investor Shares | Admiral Shares | |||||||||
Vanguard Prime Money Market | $131.4 billion | - | First Tier | 0.17% | - | |||||
Vanguard Ultra Short-Term Bond | - | 1 year (expected) | Aa | 0.20% | 0.12% | |||||
Vanguard Short-Term Investment | $52.2 billion | 2.5 years | A | 0.20% | 0.10% | |||||
Vanguard Intermediate-Term | $18.4 billion | 5.3 years | A | 0.20% | 0.10% | |||||
Vanguard Long-Term Investment | $15.7 billion | 12.9 years | A | 0.22% | 0.12% | |||||
Note: All figures are as of October 31, 2014
1 | Duration is a measure of the sensitivity of bond—and bond mutual fund—prices to interest rate movements. | ||
2 | Investment grade is a rating that indicates that the level of default of the bonds in the portfolio is relatively low. | ||
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: A Fixed Income Leader
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.
About Vanguard
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies. Vanguard manages nearly $2.8 trillion in U.S. mutual fund assets, including more than $408 billion in ETF assets. The firm offers more than 160 funds to U.S. investors and more than 120 additional funds in non-U.S. markets. For more information, visit vanguard.com.
All asset figures are as of October 31, 2014, unless otherwise noted.
For more information about Vanguard funds, visit vanguard.com or call 800-662-7447 to obtain a 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. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.
All investments are subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk.
A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.
The Emerging Markets Government Bond Index Fund is subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments. The Fund seeks to track the performance of an index that measures the investment return of U.S. dollar-denominated bonds issued by governments of emerging market countries (including government agencies and government-owned corporations). Because the Fund invests only in U.S. dollar-denominated bonds, U.S.-based shareholders are not subject to currency risk.
The Emerging Markets Government Bond Index Fund is subject to risks including country/regional risk, which is the chance that political upheaval, financial troubles, or natural disasters will adversely affect the value of securities issued by foreign governments, and emerging market risk, which is the chance that bonds of governments located in emerging markets will be substantially more volatile and substantially less liquid that the bonds of governments located in more developed foreign markets.
Vanguard Marketing Corporation, Distributor.
© 2014 The Vanguard Group, Inc. All rights reserved.
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