Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

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Paul Romano
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Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by Paul Romano » Thu Aug 09, 2018 10:20 am

https://www.prnewswire.com/news-releas ... 4764.html


Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund



"VALLEY FORGE, Pa., Aug. 9, 2018 /PRNewswire/ -- Vanguard today filed a preliminary registration statement with the Securities and Exchange Commission for Vanguard Global Credit Bond Fund. The new actively managed fund, expected to launch in November 2018, will provide investors with diversified, predominately investment-grade exposure to the U.S. and international credit markets.

"Our clients are increasingly looking to reduce their home bias and harness the return potential and diversification benefits offered by the international equity and fixed income markets," said John Hollyer, global head of Vanguard Fixed Income Group. "The new Global Credit Bond Fund's wide range of security selection opportunities and regional and sector exposures, combined with the flexibility of active management, will make it an attractive core or satellite portfolio holding."

The fund will invest in both corporate and non-corporate obligations, and will exclude government-guaranteed issues. Most of the non-U.S. portion of the portfolio will be hedged to the U.S. dollar, enabling investors to pursue a global credit premium without adding currency risk."

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by jhfenton » Thu Aug 09, 2018 10:40 am

Admiral Shares at 0.25% and Investor Shares at 0.35%. No purchase fee. It says a majority will be invested in U.S. securities. I wonder how that will break down over down time. SEC filing here. Should launch on or within a few days after November 12.

I will not be a buyer, but it'll be interesting to watch.

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Barry Barnitz
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New fund: Vanguard Global Credit Bond Fund

Post by Barry Barnitz » Thu Aug 09, 2018 3:14 pm

Hi:

Vanguard has filed a preliminary prospectusfor an actively managed global investment grade bond fund.

From the August 9, 2018 Vanguard press release:
Today, Vanguard filed a registration statement with the U.S. Securities and Exchange Commission for the proposed launch of Vanguard Global Credit Bond Fund, a U.S.-domiciled active fixed income product that is expected to be available during the fourth quarter of 2018. The fund will offer broad, diversified exposure to U.S. and non-U.S. predominantly investment-grade debt securities, including corporate and non-corporate obligations. The majority of the non-U.S. securities will be hedged to the U.S. dollar, allowing investors to pursue a global credit premium without adding significant currency risk.
The fund will offer both an Admiral share class and an Investor share class, with estimated expense ratios of 0.25% and 0.35%, respectively. The fund will be benchmarked to the Bloomberg Barclays Global Aggregate Credit Index (USD-hedged).

The high-quality, globally diversified focus of the fund allows it to be used as a core holding for investors with an active management preference. It can also be used in combination with a U.S. or global aggregate or government portfolio to achieve the desired exposure to investment grade credit.
regards,
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Re: New fund: Vanguard Global Credit Bond Fund

Post by ReformedSpender » Thu Aug 09, 2018 3:18 pm

No thanks

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by triceratop » Thu Aug 09, 2018 6:31 pm

^^ I merged Barry's duplicate topic into the ongoing discussion.
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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by spdoublebass » Thu Aug 09, 2018 9:19 pm

I thought this new fund was going to be a compliment to Total World stock fund.

Why wouldn't they just follow an index instead of actively managing it?
I'm trying to think, but nothing happens

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by bertilak » Fri Aug 10, 2018 6:20 pm

spdoublebass wrote:
Thu Aug 09, 2018 9:19 pm
I thought this new fund was going to be a compliment to Total World stock fund.

Why wouldn't they just follow an index instead of actively managing it?
I am no expert, but there may be a hint in another thread: Why does TBM have such high turnover?
I looked at VBTLX (Total Bond Index) and VBILX (Intermediate bond index) and both have a turnover rate of 55%

I believe the high turnover is required to maintain the fund's target duration. Perhaps a non-index fund will have more freedom to (somehow?) reduce the turnover, resulting in lower costs.
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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by columbia » Sun Aug 12, 2018 6:47 pm

I’m not interested in non-US debt, but I suppose I can see the theoretical appeal of the international component of this fund, as opposed to BNDX. Why would an investor want the proportions/weights of the various countries in that fund? Simply because they carry the most debt (in the context of the countries tracked by the index)? That doesn’t seem like a very good reason.

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by CyberBob » Sun Aug 12, 2018 7:56 pm

spdoublebass wrote:
Thu Aug 09, 2018 9:19 pm
I thought this new fund was going to be a compliment to Total World stock fund.
That’s another fund that’s global credit and government.
viewtopic.php?t=249955

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by spdoublebass » Tue Aug 14, 2018 10:40 am

CyberBob wrote:
Sun Aug 12, 2018 7:56 pm
spdoublebass wrote:
Thu Aug 09, 2018 9:19 pm
I thought this new fund was going to be a compliment to Total World stock fund.
That’s another fund that’s global credit and government.
viewtopic.php?t=249955

Thank you.
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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by linenfort » Thu Nov 15, 2018 10:56 am

It's on the front page of Vanguard today. Not for me, but maybe someone's interested.
Vanguard Global Credit Bond Fund (Admiral™ Shares: VGCAX; Investor Shares: VGCIX) gives you unique access to the global credit market, which includes both U.S. and international investments. The fund will be managed by the Vanguard Fixed Income Group, which has more than 35 years of experience managing active bond portfolios.
https://investornews.vanguard/our-new-v ... k-for-you/
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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by evofxdwg » Thu Nov 15, 2018 12:12 pm

I got an email this morning and noted it was open for buying. I was mildly interested in buying some of this (a chunk of Admiral VGCAX) as part of a needed rebalance, and because my Portfolio Watch analysis keeps harping on me to buy more international bonds. I only have non-US bonds as part of Vanguard Global Wellesley Income Fund Admiral Shares (VGYAX) and Vanguard Global Wellington Fund Admiral Shares (VGWAX).

The bulk of my bonds is Total Bond Index VBTLX, plus some VAIPX and a few smaller balance short term IPS and short term corporate bond funds. I poked around on the VGCAX site and found no details of target duration, but I found a possible answer in the post above that they may not want to be constrained by a target duration. So interest rate sensitivity is a concern if they go toward longer duration.

The fee is 0.25% for VGCAX vs 0.05% for VBTLX so there's that 5x factor. Not sure the gain will offset it.

I have no idea where the rest of the world is in regards to interest rates "returning to normal," and thus, future performance (compared to VBTLX expectations).

Seems like a lot of "gut feeling" in here that they are not interested. Is it the fee? If not, Why?

Do early buyers of a new fund get rooked somehow (other than they have to keep it in cash until they have enough to buy the bonds toward a target.) Is it different for new bond and new stock funds?

I have 5 different bond index funds in my IRA so I could have a spread of Gov't/Non, Inflation Protected/Non, Average duration medium/short. (I bought some short duration stuff a few years ago because I was approaching retirement, and am now retired).
Do I want to add yet another fund to my IRA bond portfolio? I also must confess to some US bias, which my reasons for are not allowed to be discussed here.
My "gut" is telling me to move toward simplifying my portfolio instead of complexifying it! And keep the fees low. So Im leaning toward no VGCAX.
Decisions....Decisions! Sigh!

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steve roy
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Vanguard's New Fund

Post by steve roy » Thu Nov 15, 2018 6:55 pm

[Thread merged into here, see below. --admin LadyGeek]

Vanguard sent me an e-mail about its new Global Credit Bond Fund (VGCAX).

https://investor.vanguard.com/mutual-fu ... file/VGCAX

Seems to be just what the name indicates. It's actively managed. And I have no plans to use it.

Thoughts of everybody else? (And if this topic is already up, a mod can delete this. (I tend to be eight hours late to whatever party is being held.)

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Re: Vanguard's New Fund

Post by alec » Thu Nov 15, 2018 7:01 pm

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" - Upton Sinclair

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by LadyGeek » Thu Nov 15, 2018 7:31 pm

I merged steve roy's thread into the on-going discussion.
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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by columbia » Thu Nov 15, 2018 7:41 pm

For the uniformed (e.g. me), what is a credit bond?

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by alec » Thu Nov 15, 2018 8:03 pm

columbia wrote:
Thu Nov 15, 2018 7:41 pm
For the uniformed (e.g. me), what is a credit bond?
The funds strategy and policy [kind of] explains it:
Investment strategy
The fund will invest in securities issued throughout the world, including issuers located in emerging markets, and denominated in global currencies. The fund will normally invest at least 80% of its assets in debt securities, primarily investing in investment-grade debt securities that the advisor believes will generate a moderate and sustainable level of current income. These debt securities include corporate and non-corporate obligations with an average rating equivalent to Baa3 and above by Moody’s Investor Services, Inc. or another independent rating agency or, if unrated, that the fund’s advisor determines to be of comparable quality. The fund may invest up to 10% of its total assets in below-investment-grade bonds. The fund will attempt to hedge most of its foreign currency exposure, primarily through the use of foreign currency exchange forward contracts, in an effort to manage the currency risk associated with investing in securities denominated in currencies other than the U.S. dollar.

Investment policy
The fund may invest in foreign issuers through American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), exchange traded funds (ETFs), or similar investment vehicles. The fund may also invest in convertible securities.

The fund may invest in securities that are convertible into common stocks, as well as invest modestly in collateralized mortgage obligations (CMOs).

The fund may also invest, to a limited extent, in derivatives. Generally speaking, a derivative is a financial contract whose value is based on the value of a financial asset (such as a stock, a bond, or a currency), a physical asset (such as gold, oil, or wheat), a market index (such as the S&P 500 Index), or a reference rate (such as LIBOR).

Investments in derivatives may subject the fund to risks different from, and possibly greater than, those of investments directly in the underlying securities or assets. The fund’s derivative investments may include fixed income futures contracts, options, straddles, credit swaps, interest rate swaps, total return swaps, and other types of derivatives. The fund will not use derivatives for speculation or for the purpose of leveraging (magnifying) investment returns.

The fund may enter into foreign currency exchange forward contracts, which are a type of derivative. A foreign currency exchange forward contract is an agreement to buy or sell a currency at a specific price on a specific date, usually 30, 60, or 90 days in the future. In other words, the contract guarantees an exchange rate on a given date.

Managers of portfolios that invest in foreign securities can use these contracts to guard against unfavorable changes in currency exchange rates. These contracts, however, would not prevent the fund‘s securities from falling in value as a result of risks other than unfavorable currency exchange movements.

To the extent that the fund enters into currency hedging transactions, the fund is subject to counterparty risk. Counterparty risk is the chance that the counterparty to a currency forward contract with the fund is unable or unwilling to meet its financial obligations. Counterparty risk is low for the fund.
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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by columbia » Thu Nov 15, 2018 8:19 pm

Yeah, I read that.

Still scratching my head over figuring out what type of individual investor will see this launch and think “oh man....this is exactly what I needed to round out my portfolio.”

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by lack_ey » Thu Nov 15, 2018 10:20 pm

columbia wrote:
Thu Nov 15, 2018 7:41 pm
For the uniformed (e.g. me), what is a credit bond?
Credit bonds are basically bonds that aren't (U.S.) government bonds and thus have some (more) credit risk associated with them. So that's corporate bonds plus other things such as bonds from foreign agencies, governments, local municipalities, taxable municipal bonds from the U.S., supranational organizations such as the Asian Development Bank and so on. Corporate bonds are the majority of credit bonds.

It used to be that a lot of the popular iShares non-government bonds index ETFs followed credit bond indexes, such as the one that had a ticker symbol of CSJ (now IGSB). But they've somewhat recently switched indexes and names to be corporate bonds only, in part I'm assuming because people didn't know what credit bonds were (and I think partially because these may have a little lower liquidity).

My understanding is that asset-backed bonds are generally not included under the credit bond umbrella.

Basically if you want credit risk, this bond fund could get you that in a moderate fashion and do so across a wider range of potential issuers than just U.S. corporations. If the cost were lower the question would be more why somebody would want corporate bonds specifically rather than a broader and potentially more diversified approach like this (or for active fans, casting a wider net with a larger opportunity space to find deals, assuming that they exist).

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Re: Press Release--Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund

Post by drzzzzz » Thu Nov 15, 2018 10:26 pm

How is this different from Vanguard Total International Bond or BNDX - is it active management compared to a passive index?

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