Vanguard to Expand Fixed-Income Offerings

Vanguard is expanding its family of low-cost bond offerings.

The firm plans to introduce Vanguard Emerging Markets Government Bond Index Fund and its exchange-traded fund (ETF) Shares by the end of the second quarter of 2013.   

An amended registration statement for the new fund filed with the U.S. Securities and Exchange Commission (SEC) reflects a new target benchmark—the Barclays USD Emerging Markets Government RIC Capped Index. The benchmark features approximately 540 government, agency and local authority bonds from 155 issuers and, when necessary, limits weightings of individual debt issuers to meet Internal Revenue Service (IRS) diversification requirements.   

The top three country holdings (as of January 31, 2013) were Russia (13.8%), Brazil (10.6%) and Mexico (8.5%). The fund will invest solely in U.S. dollar denominated emerging market bonds to protect U.S.-based investors from currency risk.   

The expense ratios for the ETF, Investor, Admiral and Institutional Shares will range from 0.30% to 0.50%. The average emerging markets bond fund features an expense ratio of 1.21% (source: Lipper, as of December 31, 2012). The fund will assess a purchase fee of 0.75% on all non-ETF Shares to help offset the higher transaction costs associated with buying emerging markets bonds.   

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