Vanguard plans to introduce two international bond index funds: Vanguard Total International Bond Index Fund and Vanguard Emerging Markets Government Bond Index Fund. The funds represent Vanguard's first international fixed income offerings for U.S. investors.
The Vanguard Total International Bond Index Fund will seek to track the investment performance of the Barclays Global Aggregate ex-USD Float Adjusted Index. The target benchmark comprises a wide spectrum of more than 7,000 global government, agency and corporate securities in 57 countries including Canada, countries in Asia, Europe and South America.
"The new Vanguard Total International Bond Index Fund will provide a low-cost way to obtain diversified exposure to one of the world's largest asset classes," says Vanguard CEO Bill McNabb.
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The fund will employ currency hedging strategies, entering into various currency transactions to protect against uncertainty in future exchange rates, according to a company press release.
The Vanguard Emerging Markets Government Bond Index Fund will seek to track the investment performance of the Barclays Emerging Markets Sovereign Index. The target benchmark features about 200 government bonds in 39 countries. By investing solely in U.S. dollar denominated international bonds, the fund will not subject the U.S.-based investors to currency risk.
Vanguard expects to offer both conventional shares (investor, admiral, and institutional) and ETF shares of the new funds, with estimated expense ratios ranging from 0.30 percent to 0.50 percent. To help offset the transaction costs associated with international bonds, the Total International Bond Index Fund and the Emerging Markets Government Bond Index Fund will assess purchase fees of 0.25 percent and 0.75 percent, respectively, on the conventional shares.
The new funds will be managed by the Vanguard Fixed Income Group, which is one of the world's largest fixed income managers and oversees $600 billion in domestic and international fixed income assets.
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