Vanguard to Introduce Low-Cost International Bond Index Fund and ETF

VALLEY FORGE, Pa.--()--Vanguard announced today that it expects to launch Vanguard Total International Bond Index Fund and its ETF Shares by the end of the second quarter.

Vanguard filed an amended registration statement for the fund with the U.S. Securities and Exchange Commission that reflects a new target index, as well as lower estimated expense ratios for various share classes of the fund and the elimination of its planned purchase fee.

The company also announced that the fund will be added as a component to Vanguard’s all-in-one funds, including its popular series of 12 Target Retirement Funds.

“Vanguard is pleased to bring its international fixed income indexing expertise and low-cost approach to U.S. investors. International bonds can serve as an important diversifier, especially for U.S. investors who currently have modest exposure to the asset class,” said Vanguard CEO Bill McNabb. He noted that Vanguard research found that a strategic allocation to hedged international bonds substantially broadens a U.S. bond portfolio, which can further moderate risk in a diversified portfolio. Vanguard believes that 20% of the bond portion of a U.S. investor's portfolio can be considered a potential target allocation to hedged international bonds.

New Target Benchmark

The Total International Bond Index Fund will seek to track the performance of a new benchmark— the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged). The index comprises approximately 7,000 high-quality corporate and government bonds (average credit quality AA2/AA3) from 52 countries. The index caps its exposure to any single bond issuer, including a government, at 20% to meet regulated investment company (RIC) tax diversification requirements. The top country holdings as of December 31, 2012, were Japan (23%), France (12%), Germany (11%), and the United Kingdom (9%).

Lower Estimated Expense Ratios

Vanguard is estimating lower expense figures in the amended filing for the Total International Bond Index Fund. The fund will offer conventional shares (Investor, Admiral, and Institutional) with projected expense ratios ranging from 0.12% to 0.23%. The ETF Shares have a projected expense ratio of 0.20%. Vanguard has also eliminated a planned 0.25% purchase fee on the fund.

Total International Bond Index Fund   Estimated Expense Ratios
    Amended Filing 2/06/2013   Initial Filing 10/31/2011
Investor Shares   0.23%   0.40%
Admiral Shares   0.20%   0.30%
Institutional Shares   0.12%   0.25%
ETF Shares   0.20%   0.30%

Total International Bond Fund to be Added to Funds of Funds

The Total International Bond Index Fund will be added to Vanguard’s funds of funds, including the Vanguard Target Retirement Funds, Vanguard LifeStrategy Funds, two of three Vanguard Managed Payout Funds, and two insurance portfolios. Each fund of funds will apportion 20% of its fixed income allocation to the Total International Bond Index Fund.

For additional details, see the separate announcement, “Vanguard to Further Diversify Target Retirement Funds,” issued by Vanguard today.

About Vanguard

Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages $2 trillion in U.S. mutual fund assets, including $245 billion in ETF assets and $28 billion in non-U.S. fixed income assets. The firm offers more than 170 funds to U.S. investors and more than 70 additional funds in non-U.S. markets.

All asset figures are as of January 31, 2013.

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.

For more information about Vanguard funds, visit 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.

Mutual funds and ETFs are subject to risks, including possible loss of principal. Investments in bond funds are subject to interest rate, credit, and inflation risk. Foreign investing involves additional risks including currency fluctuations and political uncertainty. Bonds of companies in emerging markets are generally more risky than bonds of companies in developed countries. Diversification does not ensure a profit or protect against a loss in a declining market.

The Total International Bond Index Fund is subject to currency risk, which is the chance that currency hedging transactions may not perfectly offset the fund's foreign currency exposures and may eliminate any chance for a fund to benefit from favorable fluctuations in those currencies. The fund will incur expenses to hedge its currency exposures.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. 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.

Vanguard Marketing Corporation, Distributor.


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Release Summary

Vanguard expects to launch Vanguard Total International Bond Index Fund and its ETF Shares by the end of the second quarter of 2013.


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