VALLEY FORGE, Pa.--(BUSINESS WIRE)--Vanguard today introduced Vanguard® Ultra-Short-Term Bond Fund with two low-cost share classes—Investor Shares and Admiral Shares.
The fund’s Investor Shares have an estimated expense ratio of 0.20% and require an initial minimum investment of $3,000. Admiral Shares have an estimated expense ratio of 0.12% and require a minimum investment of $50,000.
The new actively managed fund is now accepting investments during a subscription period that ends February 23, 2015. While the subscription period is in effect, the fund will invest in money market instruments as it accumulates adequate assets to construct a representative, diversified portfolio.
Following the subscription period, the fund will invest in high-quality bonds—including money market, government, and investment-grade corporate securities—and will have an expected duration of approximately one year.1
“Vanguard Ultra-Short-Term Bond Fund is a low-cost, broadly diversified fund designed for investors who, in this low-interest rate environment, seek more income than a money market fund, but recognize the risks and are willing to accept the modest price volatility that will accompany the fund," said Vanguard Chief Investment Officer Tim Buckley.
Short-Term Bond Funds: Not a Money Market Fund Substitute
Upon filing the registration statement with the U.S. Securities and Exchange Commission, Vanguard warned investors not to consider the fund a money market fund substitute. Similar to other bond funds, the fund will subject investors to some level of principal risk.
The fund broadens Vanguard’s taxable bond fund offerings, which now includes 11 active funds and 12 index funds. Vanguard’s Fixed Income Group will serve as investment advisor to the fund.
Gregory S. Nassour, CFA and David Van Ommeren, both principals and senior portfolio managers, will co-manage the fund. Mr. Nassour currently manages several investment-grade bond funds and has been with Vanguard since 1992. Mr. Van Ommeren co-leads the asset-backed and commercial mortgage-backed securities team and started with Vanguard in 1991.
Vanguard: A Fixed Income Leader
Vanguard Fixed Income Group is one of the world’s largest fixed income managers, managing 82 bond funds and 12 money market funds globally with more than $900 billion in assets—more than $270 billion in actively managed bond funds, approximately $415 billion in index funds and ETFs, and approximately $220 billion in money market funds. 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 $30.6 billion), Vanguard Short-Term Inflation-Protected Securities Index Fund (with current assets of $10.7 billion), and Vanguard Emerging Markets Government Bond Index Fund (with currents assets of $381 million).
In addition, Vanguard recently filed a registration statement to offer a national municipal bond index fund with an ETF share class. Vanguard Tax-Exempt Bond Index Fund will be the firm’s first tax-exempt index fund and ETF.
Vanguard has experienced consistently strong cash flows into its bond funds and ETFs as investors continue moving toward low-cost active and index fixed income products. In 2014, nearly $75 billion flowed into Vanguard’s U.S.-based fixed income products.
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies. Vanguard manages approximately $3 trillion in U.S. mutual fund assets, including more than $425 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 December 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.
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.
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.
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1 Investment grade is a rating that indicates that the level of default of the bonds in the portfolio is relatively low.