Vanguard Asset Management, one of the world’s largest providers of exchange-traded funds, has unveiled four new fixed income ETFs designed to provide investors with low-cost building blocks to construct a broad-based fixed income portfolio.
Vanguard has launched four new fixed income ETFs on the London Stock Exchange (file image)
The ETFs, which have been listed on the London Stock Exchange, with continental European cross-listings likely to follow, provide exposure to European and US corporate bonds, US Treasuries and eurozone government debt.
Priced competitively with total expense ratios of 0.12%, the new additions build out Vanguard’s fixed income offering, which previously only included the Vanguard UK Government Bond UCITS ETF offering UK gilt exposure.
The ETFs are:
Vanguard EUR Corporate Bond UCITS ETF (VECP)
The fund is linked to the Barclays Euro Aggregate: Corporates Index, an index designed to reflect the total universe of publicly traded, fixed-coupon, euro-denominated investment-grade corporate bonds with maturities greater than one year and which have a minimum issue size of €300 million.
Vanguard EUR Eurozone Government Bond UCITS ETF (VETY)
The fund is linked to the Barclays Euro Aggregate: Treasury Index, an index designed to reflect the total universe of publicly traded, fixed-coupon, euro-denominated treasury securities with maturities greater than one year and which have a minimum issue size of €300 million.
Vanguard USD Corporate Bond UCITS ETF (VUCP)
The fund is linked to the Barclays Global Aggregate Corporate – United States Dollar Index, an index designed to reflect the total universe of publicly traded, fixed-coupon, dollar-denominated investment grade corporate bonds with maturities greater than one year and which have a minimum issue size of $250 million.
Vanguard USD Treasury Bond UCITS ETF (VUTY)
The fund is linked to the Barclays Global Aggregate US Treasury Float Adjusted Index, an index benchmark designed to reflect the total universe of publicly traded, fixed-coupon, dollar-denominated US Treasury securities with maturities greater than one year and which have a minimum issue size of $300 million.
Commenting on the launch, Ken Volpert, Head of Investments for Vanguard in Europe, said: “Today’s launch complements Vanguard’s existing range of index mutual funds and ETFs. They will enable investors to build a broadly diversified fixed income and equity portfolio at a low-cost. As one of the world’s largest fixed income managers with approximately US$900 billion in assets globally, Vanguard has a strong track record for managing high-quality, low-cost fixed income funds.”
Lida Eslami, Listed Products Manager, London Stock Exchange, commented: “We are delighted to welcome Vanguard’s four new fixed income ETFs on the London Stock Exchange today. This listing is testament to London’s continuing status as the pre-eminent European destination for issuers and investors. Total on-exchange turnover of fixed income ETFs on our markets was over £88billion in 2015, up by 84 per cent compared to 2014 – a clear demonstration of the growing appetite for these instruments.”
With the launch of these four funds, Vanguard now offers 21 ETFs in the UK and has over £67 billion in assets under management across its European mutual fund and ETF range. Globally, the firm’s Fixed Income Group manages approximately £313 billion in index bond funds and ETFs, £190 billion in actively managed bond funds and £122 billion in money market funds.
Fixed income ETFs are one of the fast-growing segments of the ETF industry and are becoming an increasingly popular way to gain fixed income exposure. Investors are attracted to their convenient and cost-effective structure, which can provide advantages over purchasing individual bonds, which may present challenges in terms of limited trading flexibility, sourcing inventories, and potentially higher costs.