Vanguard Australia is to expand the choice available within its low-cost ETF range with the launch of the Vanguard Australian Fixed Interest Index ETF (VAF).

The new Vanguard ETF offers access to over 350 high-quality bonds issued by the Australian government, semi-government entities, supranational and sovereign entities and corporates.

The fund is expected to commence trading on the Australian Securities Exchange (ASX) shortly, pending regulatory approvals.

The fund will track the UBS Composite Bond Index, an index designed to measure the performance of over 350 high-quality bonds issued by the Commonwealth Government of Australia, Australian semi-government entities, supranational and sovereign entities and corporate entities.

Speaking about the new ETF, Vanguard’s Head of Fixed Income, Stephen Howard, said: “Fixed income is an important diversifying component of investors’ portfolios – as recent years have shown – serving as a cushion to the volatility associated with equities.

“While term deposits can serve well as short-term savings vehicles, investing in high-quality fixed income assets is all about lowering and managing risk, and ETFs provide investors with an easy, low cost way to access this asset class.”

Howard  added: “Vanguard ETFs are established as a share class of Vanguard’s wholesale fund range of index portfolios. This offers the benefit of competitive pricing and other portfolio advantages that economies of scale permit.”

Fixed income ETFs were permitted for trading on the ASX in early 2012 and already represent seven per cent of overall ETF investment. Earlier this year Vanguard added the Vanguard Australian Government Bond Index ETF (VGB) to its ETF range.

VAF has an annual management fee of 0.20%.