Vanguard to Debut International Bond Index Fund

Vanguard expects to launch Vanguard Total International Bond Index Fund and its exchange-traded fund (ETF) shares by the end of the second quarter.

Vanguard filed an amended registration statement for the fund with the Securities and Exchange Commission (SEC) 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 Total International Bond Index Fund will seek to track the performance of 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.

“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 Bill McNabb, chief executive of Vanguard.   

McNabb noted that Vanguard research found 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 20% of the bond portion of a U.S. investor’s portfolio can be considered a potential target allocation to hedged international bonds.