Target Retirement Funds to add international bonds
Vanguard today announced plans to add an international bond fund to Vanguard Target Retirement Funds and other all-in-one funds. The move is expected to further diversify these broad, balanced portfolios.
The planned new holding is Vanguard Total International Bond Index Fund, which Vanguard expects to launch by the end of the second quarter. It will complement the three other core holdings of Vanguard's all-in-one funds: Vanguard Total Stock Market Index Fund, Vanguard Total International Stock Index Fund, and Vanguard Total Bond Market II Index Fund.
The Total International Bond Index Fund will be added to the 12 Target Retirement Funds, four Vanguard LifeStrategy® Funds, two Vanguard Managed Payout Funds, and two insurance portfolios. Each of these funds of funds will apportion 20% of its fixed income allocation to the Total International Bond Index Fund.
In addition, Vanguard Short-Term Inflation-Protected Securities Index Fund (Short-Term TIPS Fund) will replace Vanguard Inflation-Protected Securities Fund in the three Target Retirement Funds that offer exposure to TIPS. The Short-Term TIPS Fund is expected to increase inflation protection while reducing volatility for that portion of the portfolios.
The current allocations to Vanguard Prime Money Market Fund in the Target Retirement Income and Target Retirement 2010 Funds will be eliminated and reallocated to the other fixed income components.
The overall strategic asset allocation and glidepath of the Target Retirement Funds will not change. The addition of hedged international bonds represents a refinement of the funds' fixed income component, bringing long-term diversification benefits. An allocation to short-term TIPS provides retirees and pre-retirees with improved inflation protection with less volatility.
The changes to the Target Retirement Funds will also apply to the Target Retirement Trusts.
The expense ratio of the LifeStrategy Income Fund has the potential to increase by an estimated one basis point because of the changes. The expense ratios of all the other affected funds are expected to be unchanged.
You can find videos and other information related to the Target Retirement Fund changes and the new fund at our Refinements to Vanguard Target Retirement Funds web page.
If you would like more information, please contact your relationship manager.