[Assessing Deflation Risk in VAIPX - Vanguard Inflation-Protected Securities fund]

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Carsson3
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[Assessing Deflation Risk in VAIPX - Vanguard Inflation-Protected Securities fund]

Post by Carsson3 »

[Title was "Vanguard run-around on Fixed Income questions". The intent is to discuss deflation risk in this fund, and information about the fund that would reveal deflation risk. See update below --admin LadyGeek]

The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
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CAsage
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Re: Vanguard run-around on Fixed Income questions

Post by CAsage »

Fascinating. What challenging question do you have that cannot be answered by the Prospectus, annual reports, the reams of data on funds?
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tibbitts
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Re: Vanguard run-around on Fixed Income questions

Post by tibbitts »

Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

CAsage wrote: Thu Mar 30, 2023 11:22 am Fascinating. What challenging question do you have that cannot be answered by the Prospectus, annual reports, the reams of data on funds?
I will respond to you and Tibbetts under Tibbetts.
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

CAsage wrote: Thu Mar 30, 2023 11:22 am Fascinating. What challenging question do you have that cannot be answered by the Prospectus, annual reports, the reams of data on funds?
I will respond to you and Tibbetts under Tibbetts.
Carsson3 wrote: Thu Mar 30, 2023 11:44 am It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
I was deliberately avoiding posting my underlying question about a specific bond fund because then the dialog could easily slant toward the material fund issue, and away from the Vanguard process issue that is the core of my post here. If referring me to Fixed Income is a wrong response by Vanguard investment personnel, and it definitely is, what should the Vanguard investment rep do? And why can't Vanguard inform them properly what to do? With Fidelity, I was given the name and postal address of the fund manager in another similar situation, but the fund manager's postal mailing address was in the central US, not in Boston. If you will respond to this point, I promise to go into my question's specifics, in this post or in a new post, referenced in this post conversation. I take your point about complexity and relevance of the question, but I believe my question is quite reasonable for the well-informed fund investor to ask and get an answer to.
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David Jay
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Re: Vanguard run-around on Fixed Income questions

Post by David Jay »

Carsson3 wrote: Thu Mar 30, 2023 11:54 amIf referring me to Fixed Income is a wrong response by Vanguard investment personnel, and it definitely is, what should the Vanguard investment rep do? And why can't Vanguard inform them properly what to do?
How can we help? What is it you want of other Bogleheads?
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retired@50
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Re: Vanguard run-around on Fixed Income questions

Post by retired@50 »

Carsson3 wrote: Thu Mar 30, 2023 11:54 am
I was deliberately avoiding posting my underlying question about a specific bond fund because then the dialog could easily slant toward the material fund issue, and away from the Vanguard process issue that is the core of my post here.
This forum is for helping investors with questions.

This forum is decidedly not for solving process issues at Vanguard. You may as well move on to the question, otherwise I suspect this thread will be locked as non-actionable.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

tibbitts wrote: Thu Mar 30, 2023 11:26 am
Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
Ok, I will post here instead of elsewhere the substance of my messaged question to Vanguard. At issue is assessing the level of deflation risk in buying a fund of secondary TIPS bonds--which is highly pertinent to clients who know how TIPS work. Because of past inflation having already raised the principal on secondary TIPS, any future deflation will cause a reduction in principal. However, for the individual TIPS bond there is a floor for this deflation effect. That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
My comment: This question is not easy, and I do not expect the Investment contact to know it. But it is a reasonable and appropriate question for a client to ask and need to know before investing in a TIPS fund. Deflation is unlikely? Inflation was unlikely until recently....
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

retired@50 wrote: Thu Mar 30, 2023 12:15 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 am
I was deliberately avoiding posting my underlying question about a specific bond fund because then the dialog could easily slant toward the material fund issue, and away from the Vanguard process issue that is the core of my post here.
This forum is for helping investors with questions.

This forum is decidedly not for solving process issues at Vanguard. You may as well move on to the question, otherwise I suspect this thread will be locked as non-actionable.

Regards,
Is there another forum for process issues at Vanguard?
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

Carsson3 wrote: Thu Mar 30, 2023 12:31 pm
retired@50 wrote: Thu Mar 30, 2023 12:15 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 am
I was deliberately avoiding posting my underlying question about a specific bond fund because then the dialog could easily slant toward the material fund issue, and away from the Vanguard process issue that is the core of my post here.
This forum is for helping investors with questions.

This forum is decidedly not for solving process issues at Vanguard. You may as well move on to the question, otherwise I suspect this thread will be locked as non-actionable.

Regards,
Is there another forum for process issues at Vanguard?
Also, I did already post the investment substance of my question to Tibbitts.
beezlebub
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Re: Vanguard run-around on Fixed Income questions

Post by beezlebub »

David Jay wrote: Thu Mar 30, 2023 12:11 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 amIf referring me to Fixed Income is a wrong response by Vanguard investment personnel, and it definitely is, what should the Vanguard investment rep do? And why can't Vanguard inform them properly what to do?
How can we help? What is it you want of other Bogleheads?
They want the crowd to join in with vilifying Vanguard. Even if the perceived problem is completely unknown as it is in this case, we are supposed to pile on agreement with him/her that Vanguard is inept and its employees are incompetent.
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TheTimeLord
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Re: Vanguard run-around on Fixed Income questions

Post by TheTimeLord »

Carsson3 wrote: Thu Mar 30, 2023 12:22 pm
tibbitts wrote: Thu Mar 30, 2023 11:26 am
Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
Ok, I will post here instead of elsewhere the substance of my messaged question to Vanguard. At issue is assessing the level of deflation risk in buying a fund of secondary TIPS bonds--which is highly pertinent to clients who know how TIPS work. Because of past inflation having already raised the principal on secondary TIPS, any future deflation will cause a reduction in principal. However, for the individual TIPS bond there is a floor for this deflation effect. That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
My comment: This question is not easy, and I do not expect the Investment contact to know it. But it is a reasonable and appropriate question for a client to ask and need to know before investing in a TIPS fund. Deflation is unlikely? Inflation was unlikely until recently....
So in essence your question is will a TIPS fund track inflation in a deflationary (negative inflation) environment? Or to what extent it will because of negative inflation adjustments to par value. But since par can't go below the original par value there is some protection from this if a portfolio contained higher levels of newer issued TIPS. If that is a significant concern of yours can I ask why aren't you just buying individual TIPS so you can evaluate the deflation risk for each bond before adding it to your portfolio?

Do I have this correct or did I misunderstand your question?
Last edited by TheTimeLord on Thu Mar 30, 2023 12:45 pm, edited 1 time in total.
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alex_686
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Re: Vanguard run-around on Fixed Income questions

Post by alex_686 »

Carsson3 wrote: Thu Mar 30, 2023 12:22 pm
tibbitts wrote: Thu Mar 30, 2023 11:26 am
Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
Ok, I will post here instead of elsewhere the substance of my messaged question to Vanguard. At issue is assessing the level of deflation risk in buying a fund of secondary TIPS bonds--which is highly pertinent to clients who know how TIPS work. Because of past inflation having already raised the principal on secondary TIPS, any future deflation will cause a reduction in principal. However, for the individual TIPS bond there is a floor for this deflation effect. That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
My comment: This question is not easy, and I do not expect the Investment contact to know it. But it is a reasonable and appropriate question for a client to ask and need to know before investing in a TIPS fund. Deflation is unlikely? Inflation was unlikely until recently....
Good heavens no. This would never be published.

For context I did this type of work for 10 years. There is a minimum amount of information you are required to publish by regulation. You never publish more than that.

Publishing the required amount of information is exhausting. Every bit gets audited. The inputs get audited, the methodology gets audited, the output gets audited. Updating the methodology requires months of work and multiple sign offs.

The expense and time of the minimum work is hard. Would you accept a higher expense ratio and a longer lag time in reporting for this?

Next, the numbers you are asking for are not exactly straight forward. i.e. lots of computation is needed (but not complex). And I am not even sure how it would be presented. And I am not sure how relevant it would be - depends on the turnover. Plus when it does happen it tends to be highly transitory because it is driven by seasonal issues.

Feel free to ask me anything.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
ehh
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Re: Vanguard run-around on Fixed Income questions

Post by ehh »

OP,

If you scroll down https://advisors.vanguard.com/investmen ... #portfolio to the "Holding Details" section, you can download the holding details of VAIPX as a csv file.

As of Feb 28 VAIPX held only 58 bonds.

Is this sufficient detail to permit you to perform your analysis? Or, to be able to look up the detail you require for each bond and perform your analysis?
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retired@50
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Re: Vanguard run-around on Fixed Income questions

Post by retired@50 »

Carsson3 wrote: Thu Mar 30, 2023 12:31 pm Is there another forum for process issues at Vanguard?
You can post in the Vanguard customer service mega thread here: viewtopic.php?t=351604

I really don't know if it will do you any good or not, but it is a place to commiserate with other people who are disappointed.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
UpperNwGuy
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Re: Vanguard run-around on Fixed Income questions

Post by UpperNwGuy »

Carsson3 wrote: Thu Mar 30, 2023 12:22 pm
tibbitts wrote: Thu Mar 30, 2023 11:26 am
Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
Ok, I will post here instead of elsewhere the substance of my messaged question to Vanguard. At issue is assessing the level of deflation risk in buying a fund of secondary TIPS bonds--which is highly pertinent to clients who know how TIPS work. Because of past inflation having already raised the principal on secondary TIPS, any future deflation will cause a reduction in principal. However, for the individual TIPS bond there is a floor for this deflation effect. That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
My comment: This question is not easy, and I do not expect the Investment contact to know it. But it is a reasonable and appropriate question for a client to ask and need to know before investing in a TIPS fund. Deflation is unlikely? Inflation was unlikely until recently....
I think it is unreasonable to expect front line customer service personnel at any brokerage to be able to answer this question. Did you try posing this same question to the customer service personnel at Fidelity or Schwab? I doubt you would have gotten a satisfactory answer there either.
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

alex_686 wrote: Thu Mar 30, 2023 12:44 pm
Carsson3 wrote: Thu Mar 30, 2023 12:22 pm
tibbitts wrote: Thu Mar 30, 2023 11:26 am
Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
Ok, I will post here instead of elsewhere the substance of my messaged question to Vanguard. At issue is assessing the level of deflation risk in buying a fund of secondary TIPS bonds--which is highly pertinent to clients who know how TIPS work. Because of past inflation having already raised the principal on secondary TIPS, any future deflation will cause a reduction in principal. However, for the individual TIPS bond there is a floor for this deflation effect. That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
My comment: This question is not easy, and I do not expect the Investment contact to know it. But it is a reasonable and appropriate question for a client to ask and need to know before investing in a TIPS fund. Deflation is unlikely? Inflation was unlikely until recently....
Good heavens no. This would never be published.

For context I did this type of work for 10 years. There is a minimum amount of information you are required to publish by regulation. You never publish more than that.

Publishing the required amount of information is exhausting. Every bit gets audited. The inputs get audited, the methodology gets audited, the output gets audited. Updating the methodology requires months of work and multiple sign offs.

The expense and time of the minimum work is hard. Would you accept a higher expense ratio and a longer lag time in reporting for this?

Next, the numbers you are asking for are not exactly straight forward. i.e. lots of computation is needed (but not complex). And I am not even sure how it would be presented. And I am not sure how relevant it would be - depends on the turnover. Plus when it does happen it tends to be highly transitory because it is driven by seasonal issues.

Feel free to ask me anything.
Thanks for responding. I am assured by your stating that the calculation I bring up is "not complex", which is what I thought, but was not sure of.
On the cost and difficulty level for fund operations, it seems to me that with roughly fifty bonds the difficulty at least on a monthly basis would be small. All you would need is a spreadsheet with all the bonds listed and the extended amounts, a column for the current inflation adjusted amount for each bond, a total of the inflation adjusted amounts for all bonds, then that total divided by the sum of the current market value for each bond, and finally weighting each bond holding as a percent of the total. So the outcome could be: 18% of the value of the fund would be lost in the case of severe prolonged deflation that eliminated all of the post-issue inflation adjustment amounts in the holdings of the bond fund. I don't know if I missed a step there, but that is the best I can do right now. This seems like a very low cost calculation, and I am not even sure I could not laboriously do it at home with Excel. But I would suspect an error on my part, and no way to really verify my calculations. To me all this seems low in cost and high in relevance. I will grant you that it may not spur fund purchases!
Concisely, my overall reasoning is:
1. Deflation risk in buying an individual secondary TIPS bond is easy to see for the well-informed investor.
2. What is easy to see for individual bonds should be calculated and provided by fund management for funds consisting only of those bonds, so the potential or actual fund investor can make fact-based judgments with mutual funds just as well as with individual holdings. Since the individual TIPS bond is transparent about the amount of deflation risk, so should the TIPs bond be transparent.
3. Therefore, TIPS fund management should routinely publish the degree and amount of deflation risk for the TIPS fund.
Clarky
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Re: Vanguard run-around on Fixed Income questions

Post by Clarky »

beezlebub wrote: Thu Mar 30, 2023 12:35 pm
David Jay wrote: Thu Mar 30, 2023 12:11 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 amIf referring me to Fixed Income is a wrong response by Vanguard investment personnel, and it definitely is, what should the Vanguard investment rep do? And why can't Vanguard inform them properly what to do?
How can we help? What is it you want of other Bogleheads?
They want the crowd to join in with vilifying Vanguard. Even if the perceived problem is completely unknown as it is in this case, we are supposed to pile on agreement with him/her that Vanguard is inept and its employees are incompetent.
+1
tibbitts
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Re: Vanguard run-around on Fixed Income questions

Post by tibbitts »

Carsson3 wrote: Thu Mar 30, 2023 11:54 am With Fidelity, I was given the name and postal address of the fund manager in another similar situation, but the fund manager's postal mailing address was in the central US, not in Boston.
With your Fidelity question, did you receive an answer from the fund manager, and was it what you expected and in acceptable detail?
Clarky
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Re: Vanguard run-around on Fixed Income questions

Post by Clarky »

Carsson3 wrote: Thu Mar 30, 2023 1:18 pm
alex_686 wrote: Thu Mar 30, 2023 12:44 pm
Carsson3 wrote: Thu Mar 30, 2023 12:22 pm
tibbitts wrote: Thu Mar 30, 2023 11:26 am
Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
Ok, I will post here instead of elsewhere the substance of my messaged question to Vanguard. At issue is assessing the level of deflation risk in buying a fund of secondary TIPS bonds--which is highly pertinent to clients who know how TIPS work. Because of past inflation having already raised the principal on secondary TIPS, any future deflation will cause a reduction in principal. However, for the individual TIPS bond there is a floor for this deflation effect. That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
My comment: This question is not easy, and I do not expect the Investment contact to know it. But it is a reasonable and appropriate question for a client to ask and need to know before investing in a TIPS fund. Deflation is unlikely? Inflation was unlikely until recently....
Good heavens no. This would never be published.

For context I did this type of work for 10 years. There is a minimum amount of information you are required to publish by regulation. You never publish more than that.

Publishing the required amount of information is exhausting. Every bit gets audited. The inputs get audited, the methodology gets audited, the output gets audited. Updating the methodology requires months of work and multiple sign offs.

The expense and time of the minimum work is hard. Would you accept a higher expense ratio and a longer lag time in reporting for this?

Next, the numbers you are asking for are not exactly straight forward. i.e. lots of computation is needed (but not complex). And I am not even sure how it would be presented. And I am not sure how relevant it would be - depends on the turnover. Plus when it does happen it tends to be highly transitory because it is driven by seasonal issues.

Feel free to ask me anything.
Thanks for responding. I am assured by your stating that the calculation I bring up is "not complex", which is what I thought, but was not sure of.
On the cost and difficulty level for fund operations, it seems to me that with roughly fifty bonds the difficulty at least on a monthly basis would be small. All you would need is a spreadsheet with all the bonds listed and the extended amounts, a column for the current inflation adjusted amount for each bond, a total of the inflation adjusted amounts for all bonds, then that total divided by the sum of the current market value for each bond, and finally weighting each bond holding as a percent of the total. So the outcome could be: 18% of the value of the fund would be lost in the case of severe prolonged deflation that eliminated all of the post-issue inflation adjustment amounts in the holdings of the bond fund. I don't know if I missed a step there, but that is the best I can do right now. This seems like a very low cost calculation, and I am not even sure I could not laboriously do it at home with Excel. But I would suspect an error on my part, and no way to really verify my calculations. To me all this seems low in cost and high in relevance. I will grant you that it may not spur fund purchases!
Concisely, my overall reasoning is:
1. Deflation risk in buying an individual secondary TIPS bond is easy to see for the well-informed investor.
2. What is easy to see for individual bonds should be calculated and provided by fund management for funds consisting only of those bonds, so the potential or actual fund investor can make fact-based judgments with mutual funds just as well as with individual holdings. Since the individual TIPS bond is transparent about the amount of deflation risk, so should the TIPs bond be transparent.
3. Therefore, TIPS fund management should routinely publish the degree and amount of deflation risk for the TIPS fund.
Yikes.
exodusNH
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Re: Vanguard run-around on Fixed Income questions

Post by exodusNH »

Carsson3 wrote: Thu Mar 30, 2023 1:18 pm All you would need is a spreadsheet with all the bonds listed and the extended amounts, a column for the current inflation adjusted amount for each bond, a total of the inflation adjusted amounts for all bonds, then that total divided by the sum of the current market value for each bond, and finally weighting each bond holding as a percent of the total. So the outcome could be: 18% of the value of the fund would be lost in the case of severe prolonged deflation that eliminated all of the post-issue inflation adjustment amounts in the holdings of the bond fund. I don't know if I missed a step there, but that is the best I can do right now. This seems like a very low cost calculation, and I am not even sure I could not laboriously do it at home with Excel. But I would suspect an error on my part, and no way to really verify my calculations. To me all this seems low in cost and high in relevance. I will grant you that it may not spur fund purchases!
Concisely, my overall reasoning is:
1. Deflation risk in buying an individual secondary TIPS bond is easy to see for the well-informed investor.
2. What is easy to see for individual bonds should be calculated and provided by fund management for funds consisting only of those bonds, so the potential or actual fund investor can make fact-based judgments with mutual funds just as well as with individual holdings. Since the individual TIPS bond is transparent about the amount of deflation risk, so should the TIPs bond be transparent.
3. Therefore, TIPS fund management should routinely publish the degree and amount of deflation risk for the TIPS fund.
"All you have to do..."

I refer to this as the "MG Syndrome", where "MG" are the initials of our contact at one of our first clients in the late 90s.

We were a two person + design contractor web shop. MG would request updates on a regular basis. MG had the ability to make most changes without us, but often preferred us to make them.

The request would be something like, "can you change the wording on this graphic?" (This was in the early days of the web. Using graphics was often the only reasonable way to get things to display the way you wanted.)

We'd tell MG that it would be an hour of work.

MG's response was, invariably, "An hour!? All you have to do it change the wording!! I could do it in 5 minutes!"

No.

We had the initial discussion with MG.
We had to grab the current version of the file, or at least verify that our copy matched what was live, since MG could make edits.
Update the file and push it to the "staging" server so MG could view it.
Email MG and ask for approval.
Once approved, which wasn't guaranteed on the first round, since once customers see things, they often change their minds.
Send the file to the live server.
Tell MG that the update was done.
Record our time.
Submit the invoice
Follow up on the invoice.

While the actual edit might have been 5 physical minutes of work, it involved all the above steps, plus the context switching.

Something like you're proposing is adding a completely new data point to a highly regulated industry. A data point that people might make investing decisions on. You can't just have "Joe Accountant" manually performing this calculation by hand every month.

Plus where would you store this data? Now you're talking about extending the data schema for mutual fund data points. Where on the prospectus and other fund literature does this appear? What's the wording that's going to be used? When do you run this calculations? What start and end dates are used? How often do you need to update it?

You need a proscribed standard and audit process for calculating it such that it applies across all providers, otherwise this number becomes subject to manipulation, even unintentional due to interpretations on the standard. (This is why Internet Explorer behaves different from Firefox which is different than Chrome -- each group interprets a standard in a slightly different way.)

You're adding all of this infrastructure for a single class of investments.
Topic Author
Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

beezlebub wrote: Thu Mar 30, 2023 12:35 pm
David Jay wrote: Thu Mar 30, 2023 12:11 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 amIf referring me to Fixed Income is a wrong response by Vanguard investment personnel, and it definitely is, what should the Vanguard investment rep do? And why can't Vanguard inform them properly what to do?
How can we help? What is it you want of other Bogleheads?
They want the crowd to join in with vilifying Vanguard. Even if the perceived problem is completely unknown as it is in this case, we are supposed to pile on agreement with him/her that Vanguard is inept and its employees are incompetent.
Responding to "vilifying": Not at all. The issue is fixing something at Vanguard so it will be better. The problem is not unknown, as I have experienced it on multiple occasions, and there is no good reason to think that my experience is unusual. I even put forward a fix: Creating a subgroup of the Vanguard investment responders who focus on fixed income, which is a specialty area more demanding in some ways than stock investing. If I had thought Vanguard was incompetent, I would not have had investments there for a long time, and I would not be posting anywhere on this site.
Responding to How can we help: Help Vanguard improve customer support in the potentially complex fixed income funds space, by providing valid feedback, so Vanguard will create a specialty fixed income support area outside of the brokerage for trading individual bonds.
Doctor Rhythm
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Re: Vanguard run-around on Fixed Income questions

Post by Doctor Rhythm »

Sometimes the only thing worse than dealing with customer service is being customer service.

McD is required to post the calorie count on a Royale with Cheese. If you want to know how much riboflavin it has, it should be easy to calculate based on its components, but unless I were a masochist, I wouldn’t ask them to do this.
Last edited by Doctor Rhythm on Thu Mar 30, 2023 2:04 pm, edited 1 time in total.
aristotelian
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Re: Vanguard run-around on Fixed Income questions

Post by aristotelian »

I don't think any ETF provider would answer questions at that level of detail. Try calling Schwab or Blackrock and you will likely find the same.
beezlebub
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Re: Vanguard run-around on Fixed Income questions

Post by beezlebub »

Carsson3 wrote: Thu Mar 30, 2023 1:56 pm
beezlebub wrote: Thu Mar 30, 2023 12:35 pm
David Jay wrote: Thu Mar 30, 2023 12:11 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 amIf referring me to Fixed Income is a wrong response by Vanguard investment personnel, and it definitely is, what should the Vanguard investment rep do? And why can't Vanguard inform them properly what to do?
How can we help? What is it you want of other Bogleheads?
They want the crowd to join in with vilifying Vanguard. Even if the perceived problem is completely unknown as it is in this case, we are supposed to pile on agreement with him/her that Vanguard is inept and its employees are incompetent.
Responding to "vilifying": Not at all. The issue is fixing something at Vanguard so it will be better. The problem is not unknown, as I have experienced it on multiple occasions, and there is no good reason to think that my experience is unusual. I even put forward a fix: Creating a subgroup of the Vanguard investment responders who focus on fixed income, which is a specialty area more demanding in some ways than stock investing. If I had thought Vanguard was incompetent, I would not have had investments there for a long time, and I would not be posting anywhere on this site.
Responding to How can we help: Help Vanguard improve customer support in the potentially complex fixed income funds space, by providing valid feedback, so Vanguard will create a specialty fixed income support area outside of the brokerage for trading individual bonds.
Surely there are better uses of one’s time? Surely.
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Nate79
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Re: Vanguard run-around on Fixed Income questions

Post by Nate79 »

I think you are confusing the roles of a customer service at a brokerage vs a financial advisor or even a fund manager. You called Vanguard the brokerage. Are you paying Vanguard for their PAS service and have a dedicated financial advisor to answer such deep technical questions?
Topic Author
Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

exodusNH wrote: Thu Mar 30, 2023 1:46 pm
Carsson3 wrote: Thu Mar 30, 2023 1:18 pm All you would need is a spreadsheet with all the bonds listed and the extended amounts, a column for the current inflation adjusted amount for each bond, a total of the inflation adjusted amounts for all bonds, then that total divided by the sum of the current market value for each bond, and finally weighting each bond holding as a percent of the total. So the outcome could be: 18% of the value of the fund would be lost in the case of severe prolonged deflation that eliminated all of the post-issue inflation adjustment amounts in the holdings of the bond fund. I don't know if I missed a step there, but that is the best I can do right now. This seems like a very low cost calculation, and I am not even sure I could not laboriously do it at home with Excel. But I would suspect an error on my part, and no way to really verify my calculations. To me all this seems low in cost and high in relevance. I will grant you that it may not spur fund purchases!
Concisely, my overall reasoning is:
1. Deflation risk in buying an individual secondary TIPS bond is easy to see for the well-informed investor.
2. What is easy to see for individual bonds should be calculated and provided by fund management for funds consisting only of those bonds, so the potential or actual fund investor can make fact-based judgments with mutual funds just as well as with individual holdings. Since the individual TIPS bond is transparent about the amount of deflation risk, so should the TIPs bond be transparent.
3. Therefore, TIPS fund management should routinely publish the degree and amount of deflation risk for the TIPS fund.
"All you have to do..."

I refer to this as the "MG Syndrome", where "MG" are the initials of our contact at one of our first clients in the late 90s.

We were a two person + design contractor web shop. MG would request updates on a regular basis. MG had the ability to make most changes without us, but often preferred us to make them.

The request would be something like, "can you change the wording on this graphic?" (This was in the early days of the web. Using graphics was often the only reasonable way to get things to display the way you wanted.)

We'd tell MG that it would be an hour of work.

MG's response was, invariably, "An hour!? All you have to do it change the wording!! I could do it in 5 minutes!"

No.

We had the initial discussion with MG.
We had to grab the current version of the file, or at least verify that our copy matched what was live, since MG could make edits.
Update the file and push it to the "staging" server so MG could view it.
Email MG and ask for approval.
Once approved, which wasn't guaranteed on the first round, since once customers see things, they often change their minds.
Send the file to the live server.
Tell MG that the update was done.
Record our time.
Submit the invoice
Follow up on the invoice.

While the actual edit might have been 5 physical minutes of work, it involved all the above steps, plus the context switching.

Something like you're proposing is adding a completely new data point to a highly regulated industry. A data point that people might make investing decisions on. You can't just have "Joe Accountant" manually performing this calculation by hand every month.

Plus where would you store this data? Now you're talking about extending the data schema for mutual fund data points. Where on the prospectus and other fund literature does this appear? What's the wording that's going to be used? When do you run this calculations? What start and end dates are used? How often do you need to update it?

You need a proscribed standard and audit process for calculating it such that it applies across all providers, otherwise this number becomes subject to manipulation, even unintentional due to interpretations on the standard. (This is why Internet Explorer behaves different from Firefox which is different than Chrome -- each group interprets a standard in a slightly different way.)

You're adding all of this infrastructure for a single class of investments.
You make many interesting points. I would still put it to you that TIPS, and thus their funds, are quite unusual in their structure and nature, and it is not useful or helpful to treat them too much like nominal bonds and funds in fund reporting. Everything you state applies quite soundly to stocks and nominal bonds and their funds, no objections from me there.
I am assuming you thoroughly understand how TIPs work, with par value at issue being adjusted up continually with persistent inflation, or continually down with persistent deflation.
So if I am considering buying a TIPS fund #1, I would want to know how much prior inflation is included in the aggregate principal value of the fund's holdings at a given time, presumably on a per share basis. If I pay $10 a share for TIPS fund #1, and the accumulated inflation adjustment since issue is $2 a share in the principal of TIPS fund #1, then persistent deflation could subtract up to $2 per share from par value with long term deflation, but no more. If a competing TIPS fund #2 sells for $10 a share, but only $1 a share is accumulated prior inflation since issue (weighted averages of course), then I know that the second TIPS fund is much more deflation resistant, which is very important for a fund owner or prospective buyer.
So in your view, for the sake of fund company consistency across stocks, nominal bonds, and TIPS bonds, I should not know which of two given TIPS funds are intrinsically more deflation resistant? Rather than that, shouldn't the fund company for TIPS fund #1 just stay out of the TIPS market, if accounting consistency has top priority for them?
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

tibbitts wrote: Thu Mar 30, 2023 1:40 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 am With Fidelity, I was given the name and postal address of the fund manager in another similar situation, but the fund manager's postal mailing address was in the central US, not in Boston.
With your Fidelity question, did you receive an answer from the fund manager, and was it what you expected and in acceptable detail?
I did receive a lengthy and quite adequate written response from the office of the Fidelity fund manager, not from him but from someone in his area. I was quite pleased. I asked Vanguard today whether the fund manager at Vanguard would tend to respond to questions from fund holders via postal mail. He did not want to say, but I did prevail on him to check with his supervisor I don't want to waste time mailing to a dead letter box. The investment contact is supposed to call me back on this.
Topic Author
Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

Doctor Rhythm wrote: Thu Mar 30, 2023 2:00 pm Sometimes the only thing worse than dealing with customer service is being customer service.

McD is required to post the calorie count on a Royale with Cheese. If you want to know how much riboflavin it has, it should be easy to calculate based on its components, but unless I were a masochist, I wouldn’t ask them to do this.
See my response to ExodusNH. I don't think this is a detail-oriented question in the sense of not widely useful and not important. I think the overall question is a fundamental and essential one for TIPs funds.
Topic Author
Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

Nate79 wrote: Thu Mar 30, 2023 2:29 pm I think you are confusing the roles of a customer service at a brokerage vs a financial advisor or even a fund manager. You called Vanguard the brokerage. Are you paying Vanguard for their PAS service and have a dedicated financial advisor to answer such deep technical questions?
"Fixed income" in my postings refers to the brokerage, which will not respond to questions on funds. See my response to ExodusNH for the information I see not being technical or trivial, for TIPs fund investors.
Topic Author
Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

retired@50 wrote: Thu Mar 30, 2023 12:15 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 am
I was deliberately avoiding posting my underlying question about a specific bond fund because then the dialog could easily slant toward the material fund issue, and away from the Vanguard process issue that is the core of my post here.
This forum is for helping investors with questions.

This forum is decidedly not for solving process issues at Vanguard. You may as well move on to the question, otherwise I suspect this thread will be locked as non-actionable.

Regards,
Thanks, I already did that.
exodusNH
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Re: Vanguard run-around on Fixed Income questions

Post by exodusNH »

Carsson3 wrote: Thu Mar 30, 2023 2:41 pm You make many interesting points. I would still put it to you that TIPS, and thus their funds, are quite unusual in their structure and nature, and it is not useful or helpful to treat them too much like nominal bonds and funds in fund reporting. Everything you state applies quite soundly to stocks and nominal bonds and their funds, no objections from me there.
I am assuming you thoroughly understand how TIPs work, with par value at issue being adjusted up continually with persistent inflation, or continually down with persistent deflation.
So if I am considering buying a TIPS fund #1, I would want to know how much prior inflation is included in the aggregate principal value of the fund's holdings at a given time, presumably on a per share basis. If I pay $10 a share for TIPS fund #1, and the accumulated inflation adjustment since issue is $2 a share in the principal of TIPS fund #1, then persistent deflation could subtract up to $2 per share from par value with long term deflation, but no more. If a competing TIPS fund #2 sells for $10 a share, but only $1 a share is accumulated prior inflation since issue (weighted averages of course), then I know that the second TIPS fund is much more deflation resistant, which is very important for a fund owner or prospective buyer.
So in your view, for the sake of fund company consistency across stocks, nominal bonds, and TIPS bonds, I should not know which of two given TIPS funds are intrinsically more deflation resistant? Rather than that, shouldn't the fund company for TIPS fund #1 just stay out of the TIPS market, if accounting consistency has top priority for them?
Here's the thing: the fund can trade out a bond at any time. If they told you today that the fund has a collective 18% deflation potential, that could change to 25% tomorrow when they sell a bond that no longer meets their needs and replaces it with a different one. Even index-tracking funds do this "frequently" to maintain their average duration. Your decision to buy fund A instead of B because of the deflation potential could be completely invalidated immediately after you place your order.

Remember, the mutual fund / ETF following their charter, documented in the prospectus.

For example, VTIP
Seeks to track an index that measures the performance of inflation-protected public obligations of the U.S. Treasury that have a remaining maturity of less than five years.

Designed to generate returns more closely correlated with realized inflation over the near term, and to offer investors the potential for less volatility of returns relative to a longer-duration TIPS fund.

Given its shorter duration, the fund can be expected to have less real interest rate risk, but also lower total returns relative to a longer-duration TIPS fund.

Invests in bonds backed by the full faith and credit of the federal government and whose principal is adjusted semiannually based on inflation.

Can provide protection from inflationary surprises or ”unexpected inflation.”
Nowhere in that list is "manage exposure to deflation risk".

Since it's not part of the fund, why should they track this information? You don't track / report on any more than you have to, since that exposes you to liability. (This is why you always see "consult with your tax advisor" slapped on everything.)

The calculation is going to change, maybe many times per day, as ETF shares are created/redeemed.

And again, this isn't the purview of the fund. It's what a financial advisor would be calculating for you.
boglesmind
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Re: Vanguard run-around on Fixed Income questions

Post by boglesmind »

Carsson3 wrote: Thu Mar 30, 2023 2:41 pm So in your view, for the sake of fund company consistency across stocks, nominal bonds, and TIPS bonds, I should not know which of two given TIPS funds are intrinsically more deflation resistant? Rather than that, shouldn't the fund company for TIPS fund #1 just stay out of the TIPS market, if accounting consistency has top priority for them?
No one in this thread said that you should not know. If you want a fund company A/B/C to stay out of the market for some fund X, please join that company at a level where you can influence their activities and do what you suggest. Discussing it in BH forum is pointless and not actionable. You appear to be more informed of TIPS bonds and TIPS bond funds fundamentals than most (or at least a lot of ) investors / BH forum members. You should be able to do the calculations yourself and perhaps post a spreadsheet that others can benefit from (just like treasury vs single-state muni vs multi-state muni money market yields spreadsheets and other such floating around in BH forums.

The title of this thread needs to be changed to "Customer wants some info from Vanguard that no other brokerages seem to provide" or some thing similar. Otherwise it is misleading and piles on the "Bash Vanguard" band wagon.

I am going to request moderators to lock this thread as it is not actionable in any way. Very thoughtful and helpful comments from other posters have only led to more contentious posts from the OP.

Boglesmind.
boglesmind
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Re: Vanguard run-around on Fixed Income questions

Post by boglesmind »

exodusNH wrote: Thu Mar 30, 2023 3:04 pm
Carsson3 wrote: Thu Mar 30, 2023 2:41 pm You make many interesting points. I would still put it to you that TIPS, and thus their funds, are quite unusual in their structure and nature, and it is not useful or helpful to treat them too much like nominal bonds and funds in fund reporting. Everything you state applies quite soundly to stocks and nominal bonds and their funds, no objections from me there.
I am assuming you thoroughly understand how TIPs work, with par value at issue being adjusted up continually with persistent inflation, or continually down with persistent deflation.
So if I am considering buying a TIPS fund #1, I would want to know how much prior inflation is included in the aggregate principal value of the fund's holdings at a given time, presumably on a per share basis. If I pay $10 a share for TIPS fund #1, and the accumulated inflation adjustment since issue is $2 a share in the principal of TIPS fund #1, then persistent deflation could subtract up to $2 per share from par value with long term deflation, but no more. If a competing TIPS fund #2 sells for $10 a share, but only $1 a share is accumulated prior inflation since issue (weighted averages of course), then I know that the second TIPS fund is much more deflation resistant, which is very important for a fund owner or prospective buyer.
So in your view, for the sake of fund company consistency across stocks, nominal bonds, and TIPS bonds, I should not know which of two given TIPS funds are intrinsically more deflation resistant? Rather than that, shouldn't the fund company for TIPS fund #1 just stay out of the TIPS market, if accounting consistency has top priority for them?
Here's the thing: the fund can trade out a bond at any time. If they told you today that the fund has a collective 18% deflation potential, that could change to 25% tomorrow when they sell a bond that no longer meets their needs and replaces it with a different one. Even index-tracking funds do this "frequently" to maintain their average duration. Your decision to buy fund A instead of B because of the deflation potential could be completely invalidated immediately after you place your order.

Remember, the mutual fund / ETF following their charter, documented in the prospectus.

For example, VTIP
Seeks to track an index that measures the performance of inflation-protected public obligations of the U.S. Treasury that have a remaining maturity of less than five years.

Designed to generate returns more closely correlated with realized inflation over the near term, and to offer investors the potential for less volatility of returns relative to a longer-duration TIPS fund.

Given its shorter duration, the fund can be expected to have less real interest rate risk, but also lower total returns relative to a longer-duration TIPS fund.

Invests in bonds backed by the full faith and credit of the federal government and whose principal is adjusted semiannually based on inflation.

Can provide protection from inflationary surprises or ”unexpected inflation.”
Nowhere in that list is "manage exposure to deflation risk".

Since it's not part of the fund, why should they track this information? You don't track / report on any more than you have to, since that exposes you to liability. (This is why you always see "consult with your tax advisor" slapped on everything.)

The calculation is going to change, maybe many times per day, as ETF shares are created/redeemed.

And again, this isn't the purview of the fund. It's what a financial advisor would be calculating for you.
+1.
Always a pleasure reading your and countless other such invaluable forum members' posts for their very thoughtful, informative and educational content.

Boglesmind
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Beensabu
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Re: Vanguard run-around on Fixed Income questions

Post by Beensabu »

Carsson3 wrote: Thu Mar 30, 2023 12:22 pm That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
Look at "Weighted Price" on M*:

https://www.morningstar.com/funds/xnas/vaipx/portfolio

It's 95.26 as of end of Jan. So holdings were at ~95% of par value as of end of Jan.

If you look up net assets of the fund, you can figure out what the par value of holdings is and find your floor.

Does that help?
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dagsboro
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Re: Vanguard run-around on Fixed Income questions

Post by dagsboro »

Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
When I read this question and the replies, I was immediately reminded of the knowledge and patience so many bogleheads have.
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Re: Vanguard run-around on Fixed Income questions

Post by tibbitts »

Carsson3 wrote: Thu Mar 30, 2023 2:57 pm
tibbitts wrote: Thu Mar 30, 2023 1:40 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 am With Fidelity, I was given the name and postal address of the fund manager in another similar situation, but the fund manager's postal mailing address was in the central US, not in Boston.
With your Fidelity question, did you receive an answer from the fund manager, and was it what you expected and in acceptable detail?
I did receive a lengthy and quite adequate written response from the office of the Fidelity fund manager, not from him but from someone in his area. I was quite pleased. I asked Vanguard today whether the fund manager at Vanguard would tend to respond to questions from fund holders via postal mail. He did not want to say, but I did prevail on him to check with his supervisor I don't want to waste time mailing to a dead letter box. The investment contact is supposed to call me back on this.
I wouldn't have expected such a useful response from Fidelity (or Schwab, etc.) so I'll be interested to know if Vanguard replies to your request for at least contact information.
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

exodusNH wrote: Thu Mar 30, 2023 3:04 pm
Carsson3 wrote: Thu Mar 30, 2023 2:41 pm You make many interesting points. I would still put it to you that TIPS, and thus their funds, are quite unusual in their structure and nature, and it is not useful or helpful to treat them too much like nominal bonds and funds in fund reporting. Everything you state applies quite soundly to stocks and nominal bonds and their funds, no objections from me there.
I am assuming you thoroughly understand how TIPs work, with par value at issue being adjusted up continually with persistent inflation, or continually down with persistent deflation.
So if I am considering buying a TIPS fund #1, I would want to know how much prior inflation is included in the aggregate principal value of the fund's holdings at a given time, presumably on a per share basis. If I pay $10 a share for TIPS fund #1, and the accumulated inflation adjustment since issue is $2 a share in the principal of TIPS fund #1, then persistent deflation could subtract up to $2 per share from par value with long term deflation, but no more. If a competing TIPS fund #2 sells for $10 a share, but only $1 a share is accumulated prior inflation since issue (weighted averages of course), then I know that the second TIPS fund is much more deflation resistant, which is very important for a fund owner or prospective buyer.
So in your view, for the sake of fund company consistency across stocks, nominal bonds, and TIPS bonds, I should not know which of two given TIPS funds are intrinsically more deflation resistant? Rather than that, shouldn't the fund company for TIPS fund #1 just stay out of the TIPS market, if accounting consistency has top priority for them?
Here's the thing: the fund can trade out a bond at any time. If they told you today that the fund has a collective 18% deflation potential, that could change to 25% tomorrow when they sell a bond that no longer meets their needs and replaces it with a different one. Even index-tracking funds do this "frequently" to maintain their average duration. Your decision to buy fund A instead of B because of the deflation potential could be completely invalidated immediately after you place your order.

Remember, the mutual fund / ETF following their charter, documented in the prospectus.

For example, VTIP
Seeks to track an index that measures the performance of inflation-protected public obligations of the U.S. Treasury that have a remaining maturity of less than five years.

Designed to generate returns more closely correlated with realized inflation over the near term, and to offer investors the potential for less volatility of returns relative to a longer-duration TIPS fund.

Given its shorter duration, the fund can be expected to have less real interest rate risk, but also lower total returns relative to a longer-duration TIPS fund.

Invests in bonds backed by the full faith and credit of the federal government and whose principal is adjusted semiannually based on inflation.

Can provide protection from inflationary surprises or ”unexpected inflation.”
Nowhere in that list is "manage exposure to deflation risk".

Since it's not part of the fund, why should they track this information? You don't track / report on any more than you have to, since that exposes you to liability. (This is why you always see "consult with your tax advisor" slapped on everything.)

The calculation is going to change, maybe many times per day, as ETF shares are created/redeemed.

And again, this isn't the purview of the fund. It's what a financial advisor would be calculating for you.
I am in funds only, no ETFs at all. Without looking, I think the turnover in VAIPX is 20% annually, and last I looked it had a little over 50 holdings, all TIPS bonds. TIPS available for an intermediate fund are very few in number, especially compared to the numerous and distinctive corporate nominal bonds. Ignoring deflation risk is for sure part of the fund's marketing scheme, somewhat similar to pointing to the upside of equities and mentioning some volatility, without mentioning the floor is zero dollars for equities, or tangible book anyway. I suppose I am 'jabbing Vanguard a bit in the ribs' by taking seriously their statements about supporting investing clients in their goals. Guity of that. So I should not take those statements seriously, I suppose you are implying. Granted. I would make a side bet. If deflation is persistent in some future period, the question I am asking will be automatically answered in advance explicitly by every major company TIPS fund. I want to say: "I guarantee it."
grok87
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Re: Vanguard run-around on Fixed Income questions

Post by grok87 »

Beensabu wrote: Thu Mar 30, 2023 3:18 pm
Carsson3 wrote: Thu Mar 30, 2023 12:22 pm That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
Look at "Weighted Price" on M*:

https://www.morningstar.com/funds/xnas/vaipx/portfolio

It's 95.26 as of end of Jan. So holdings were at ~95% of par value as of end of Jan.

If you look up net assets of the fund, you can figure out what the par value of holdings is and find your floor.

Does that help?
it's a good thought but i don't think it works. this calc would help you get "inflation-adjusted par". i think OP wants to know how much that is above original par.
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Re: Vanguard run-around on Fixed Income questions

Post by LadyGeek »

This thread has run its course and is locked (not actionable, topic exhausted). See: Locked Topics
Moderators or site admins may lock a topic (set it so no more replies may be added) when a violation of posting policy has occurred. Occasionally, even if there are no overt violations of posting policy, a topic (or thread) will reach a point where the information content of the discussion has been essentially exhausted and further replies are much more likely to cause distress to the community than add anything of value.
Update: See below.
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Re: [Assessing Deflation Risk in VAIPX]

Post by LadyGeek »

After receiving clarification from the OP, I have retitled the thread. The intent is to discuss deflation risk in this fund, and information about the fund that would reveal deflation risk.

This thread is now unlocked to continue the discussion.


This thread is now in the Investing - Theory, News & General forum (general discussion).
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

boglesmind wrote: Thu Mar 30, 2023 3:09 pm
Carsson3 wrote: Thu Mar 30, 2023 2:41 pm So in your view, for the sake of fund company consistency across stocks, nominal bonds, and TIPS bonds, I should not know which of two given TIPS funds are intrinsically more deflation resistant? Rather than that, shouldn't the fund company for TIPS fund #1 just stay out of the TIPS market, if accounting consistency has top priority for them?
No one in this thread said that you should not know. If you want a fund company A/B/C to stay out of the market for some fund X, please join that company at a level where you can influence their activities and do what you suggest. Discussing it in BH forum is pointless and not actionable. You appear to be more informed of TIPS bonds and TIPS bond funds fundamentals than most (or at least a lot of ) investors / BH forum members. You should be able to do the calculations yourself and perhaps post a spreadsheet that others can benefit from (just like treasury vs single-state muni vs multi-state muni money market yields spreadsheets and other such floating around in BH forums.

The title of this thread needs to be changed to "Customer wants some info from Vanguard that no other brokerages seem to provide" or some thing similar. Otherwise it is misleading and piles on the "Bash Vanguard" band wagon.

I am going to request moderators to lock this thread as it is not actionable in any way. Very thoughtful and helpful comments from other posters have only led to more contentious posts from the OP.

Boglesmind.
The topic is TIPS funds and deflation, which is highly reasonable, I think you would agree. I have no interest in munis and seem to have missed your point in bringing them up.

The important distinction is between a TIPS fund's inflation-adjusted par and the original, not inflation adjusted par. This is very important information for any TIPS fund because it expresses deflation risk, which is a serious risk, even if still less probable. If you view deflation risk as irrelevant, fine, others may disagree.

You in effect raise a good question: Do any other fund companies with TIPS funds publish, or provide for the asking, both their fund's current inflation-adjusted par value and the original par value for the given fund? This question is relevant only in the context of actual or contemplated deflation lasting for a while, but in that scenario it is highly relevant. If deflation appears or the anticipation of it appears, then this question will become a highly relevant one, and probably an issue addressed by many TIPS funds and perhaps by the financial press.
A proper assessment of a given TIPS fund's deflation risk would be highly actionable, would it not? It sure would be for me.
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

exodusNH wrote: Thu Mar 30, 2023 3:04 pm
Carsson3 wrote: Thu Mar 30, 2023 2:41 pm You make many interesting points. I would still put it to you that TIPS, and thus their funds, are quite unusual in their structure and nature, and it is not useful or helpful to treat them too much like nominal bonds and funds in fund reporting. Everything you state applies quite soundly to stocks and nominal bonds and their funds, no objections from me there.
I am assuming you thoroughly understand how TIPs work, with par value at issue being adjusted up continually with persistent inflation, or continually down with persistent deflation.
So if I am considering buying a TIPS fund #1, I would want to know how much prior inflation is included in the aggregate principal value of the fund's holdings at a given time, presumably on a per share basis. If I pay $10 a share for TIPS fund #1, and the accumulated inflation adjustment since issue is $2 a share in the principal of TIPS fund #1, then persistent deflation could subtract up to $2 per share from par value with long term deflation, but no more. If a competing TIPS fund #2 sells for $10 a share, but only $1 a share is accumulated prior inflation since issue (weighted averages of course), then I know that the second TIPS fund is much more deflation resistant, which is very important for a fund owner or prospective buyer.
So in your view, for the sake of fund company consistency across stocks, nominal bonds, and TIPS bonds, I should not know which of two given TIPS funds are intrinsically more deflation resistant? Rather than that, shouldn't the fund company for TIPS fund #1 just stay out of the TIPS market, if accounting consistency has top priority for them?
Here's the thing: the fund can trade out a bond at any time. If they told you today that the fund has a collective 18% deflation potential, that could change to 25% tomorrow when they sell a bond that no longer meets their needs and replaces it with a different one. Even index-tracking funds do this "frequently" to maintain their average duration. Your decision to buy fund A instead of B because of the deflation potential could be completely invalidated immediately after you place your order.

Remember, the mutual fund / ETF following their charter, documented in the prospectus.

For example, VTIP
Seeks to track an index that measures the performance of inflation-protected public obligations of the U.S. Treasury that have a remaining maturity of less than five years.

Designed to generate returns more closely correlated with realized inflation over the near term, and to offer investors the potential for less volatility of returns relative to a longer-duration TIPS fund.

Given its shorter duration, the fund can be expected to have less real interest rate risk, but also lower total returns relative to a longer-duration TIPS fund.

Invests in bonds backed by the full faith and credit of the federal government and whose principal is adjusted semiannually based on inflation.

Can provide protection from inflationary surprises or ”unexpected inflation.”
Nowhere in that list is "manage exposure to deflation risk".

Since it's not part of the fund, why should they track this information? You don't track / report on any more than you have to, since that exposes you to liability. (This is why you always see "consult with your tax advisor" slapped on everything.)

The calculation is going to change, maybe many times per day, as ETF shares are created/redeemed.

And again, this isn't the purview of the fund. It's what a financial advisor would be calculating for you.
We certainly agree that VAIPX for example (fund, not ETF) in no way manages exposure to deflation risk. Presumably, "manage" in sentences like this refers to reduces in some way. But TIPS funds, if they have a lot of inflation buildup in their par values, create a large amount of deflation risk, which would be the opposite of managing it, I would think. I will check out the VAIPX prospectus for "deflation".
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

UpperNwGuy wrote: Thu Mar 30, 2023 1:17 pm
Carsson3 wrote: Thu Mar 30, 2023 12:22 pm
tibbitts wrote: Thu Mar 30, 2023 11:26 am
Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
Ok, I will post here instead of elsewhere the substance of my messaged question to Vanguard. At issue is assessing the level of deflation risk in buying a fund of secondary TIPS bonds--which is highly pertinent to clients who know how TIPS work. Because of past inflation having already raised the principal on secondary TIPS, any future deflation will cause a reduction in principal. However, for the individual TIPS bond there is a floor for this deflation effect. That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
My comment: This question is not easy, and I do not expect the Investment contact to know it. But it is a reasonable and appropriate question for a client to ask and need to know before investing in a TIPS fund. Deflation is unlikely? Inflation was unlikely until recently....
I think it is unreasonable to expect front line customer service personnel at any brokerage to be able to answer this question. Did you try posing this same question to the customer service personnel at Fidelity or Schwab? I doubt you would have gotten a satisfactory answer there either.
I agree with you. But the question is pertinent and reasonable. As stated elsewhere, Fidelity gave me an address in Ohio, I think, to write their fund management office there, and I got a solid reply a page long or more in about a week.
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

TheTimeLord wrote: Thu Mar 30, 2023 12:38 pm
Carsson3 wrote: Thu Mar 30, 2023 12:22 pm
tibbitts wrote: Thu Mar 30, 2023 11:26 am
Carsson3 wrote: Thu Mar 30, 2023 11:18 am The following has been happening to me over and over for a year or more. I ask a someone at Vanguard a challenging question about a Vanguard bond fund, challenging because bonds are more complex than stocks. The person I reach states that I need to talk to Fixed Income. I contact Fixed Income, and I am told that they do not address questions involving mutual funds. So, I again contact Investments and tell the person that Fixed Income does not address funds. After a long wait, I get no material response at all.
There are two problems here:
(1) the Investment support contacts never realize that Fixed Income personnel will not address mutual funds, and
(2) Vanguard personnel in Investments cannot address many questions about their own bond funds, due to not understanding investing in bonds apparently.
The first problem could be resolved by Vanguard correctly informing its Investments personnel about Fixed Income not responding on funds.
The second problem could be addressed by Vanguard developing a subgroup in Investments that is highly competent about bond funds and therefore bonds.
Can anyone else advise on their experience in this area, and also on how to make Vanguard improve this process?
It would help if you posed the actual question. It matters if this was a practical question or more of an academic one to challenge the level of knowledge you'd have access to. Realistically there are questions that only the fund managers are going to know, and you aren't going to talk to them. It would be like asking a car manufacturer an engineering question about one of their models. There's just a level of detail you're not going to get an answer to, not because it's proprietary or because nobody at the company knows it, but because there's no practical reason for a consumer to need to know that level of detail, and the company can't afford to give a consumer access to someone who knows. They don't need/want your money that much.
Ok, I will post here instead of elsewhere the substance of my messaged question to Vanguard. At issue is assessing the level of deflation risk in buying a fund of secondary TIPS bonds--which is highly pertinent to clients who know how TIPS work. Because of past inflation having already raised the principal on secondary TIPS, any future deflation will cause a reduction in principal. However, for the individual TIPS bond there is a floor for this deflation effect. That floor is the original unadjusted par value of the individual bond. So should there not be a publishable number for a fund of such holdings, a number that I would think of as the deflation protecting floor for the fund (use VAIPX), calculated as weighted average of the individual bond holdings, each of which by necessity has a deflation-protecting floor? Without this number being available, fund holders have no way of assessing the deflation risk of a secondary TIPS fund at a given point in time, a number that is readily available for the individual TIPS bond.
My comment: This question is not easy, and I do not expect the Investment contact to know it. But it is a reasonable and appropriate question for a client to ask and need to know before investing in a TIPS fund. Deflation is unlikely? Inflation was unlikely until recently....
So in essence your question is will a TIPS fund track inflation in a deflationary (negative inflation) environment? Or to what extent it will because of negative inflation adjustments to par value. But since par can't go below the original par value there is some protection from this if a portfolio contained higher levels of newer issued TIPS. If that is a significant concern of yours can I ask why aren't you just buying individual TIPS so you can evaluate the deflation risk for each bond before adding it to your portfolio?

Do I have this correct or did I misunderstand your question?
Sorry if I missed your reply before. The forum software is not always clear to me.

Individual secondary TIPS have the problem of tax calculations, very complex. I prefer not to hire a tax person. Somehow buying at issue individual TIPS does not appeal to me. Lastly, my wife can handle a fund but not the individual TIPS issues, so I stick with funds for that reason as well.

I would like to model a TIPs fund on an individual TIPs bond, insofar as the individual bond has certain features and the TIPS funds will have those features too, but in weighted average numbers. The main difference of course is that the fund never matures, but otherwise the investing is 'the same' for TIPs and TIPs funds. This could not be said of stock or corporate bond funds, for which investments are too dissimilar from each other.

I could compare two individual TIPs for deflation risk, easy. I would like to have numbers from the TIPs funds that would enable me to compared two TIPs funds for deflation risk. I think these numbers are very easy to calculate, but not asked by for much, and not helpful for selling funds. I think the funds would serve clients best by making such numbers routinely available. Whether they will or not, of course I do not know.
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Re: Vanguard run-around on Fixed Income questions

Post by boglesmind »

tibbitts wrote: Thu Mar 30, 2023 3:45 pm
Carsson3 wrote: Thu Mar 30, 2023 2:57 pm
tibbitts wrote: Thu Mar 30, 2023 1:40 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 am With Fidelity, I was given the name and postal address of the fund manager in another similar situation, but the fund manager's postal mailing address was in the central US, not in Boston.
With your Fidelity question, did you receive an answer from the fund manager, and was it what you expected and in acceptable detail?
I did receive a lengthy and quite adequate written response from the office of the Fidelity fund manager, not from him but from someone in his area. I was quite pleased. I asked Vanguard today whether the fund manager at Vanguard would tend to respond to questions from fund holders via postal mail. He did not want to say, but I did prevail on him to check with his supervisor I don't want to waste time mailing to a dead letter box. The investment contact is supposed to call me back on this.
I wouldn't have expected such a useful response from Fidelity (or Schwab, etc.) so I'll be interested to know if Vanguard replies to your request for at least contact information.
OP said he got an adequate response form Fidelity but didn't quote what it was. Based on detailed posts from Nisiprius and others, I doubt the usefulness of any letter which is likely to become "stale" as soon as it is printed. One of the posters indicated how bond fund composition and interest rate changes necessitate almost daily reassessment of deflation risk. This is why I suggested the creation of a live spreadsheet to assess the deflation risk in VAIPX (and similar funds). For example, some BH created an excel sheet to compare the yields of Treasury, single-state and multi-state municipal money market funds at various tax rates which a lot of folks find quite useful. In fact, OP themselves indicated in one of the messages that the calculations are simple :-)

Boglesmind
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Re: Vanguard run-around on Fixed Income questions

Post by exodusNH »

Carsson3 wrote: Thu Mar 30, 2023 3:46 pm I am in funds only, no ETFs at all. Without looking, I think the turnover in VAIPX is 20% annually, and last I looked it had a little over 50 holdings, all TIPS bonds. TIPS available for an intermediate fund are very few in number, especially compared to the numerous and distinctive corporate nominal bonds. Ignoring deflation risk is for sure part of the fund's marketing scheme, somewhat similar to pointing to the upside of equities and mentioning some volatility, without mentioning the floor is zero dollars for equities, or tangible book anyway. I suppose I am 'jabbing Vanguard a bit in the ribs' by taking seriously their statements about supporting investing clients in their goals. Guity of that. So I should not take those statements seriously, I suppose you are implying. Granted. I would make a side bet. If deflation is persistent in some future period, the question I am asking will be automatically answered in advance explicitly by every major company TIPS fund. I want to say: "I guarantee it."
The same thing applies to mutual funds (which ETFs are a type of.) Everyday, the inflows and outflows are netted. The fund will probably have a cash buffer, but may still need to trade. They also need to manage for duration. VAIPX is a managed fund, but doesn't seem to be setup to manage deflation risk. They do, however, have discretion in when and what they sell withing the constraints of needing to satisfy customer activity and dividend requirements, the latter of which can also cause them to sell.

I'm sure you know this, but I didn't until recently:

There are only 51 outstanding TIPS. Every fund that holds TIPS holds a subset of those 51 notes/bonds. They will of course, have different lots, but the underlying bond is the same. They will all deflate by the same absolute amount, though the purchase price of each lot will vary.

But again, since they're not trying to manage deflation risk, they're not going to do anything explicitly about it, which also gives them no reason to measure and publish that information. There's no point in breaking into jail, so to speak.
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Carsson3
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Re: Vanguard run-around on Fixed Income questions

Post by Carsson3 »

boglesmind wrote: Thu Mar 30, 2023 6:02 pm
tibbitts wrote: Thu Mar 30, 2023 3:45 pm
Carsson3 wrote: Thu Mar 30, 2023 2:57 pm
tibbitts wrote: Thu Mar 30, 2023 1:40 pm
Carsson3 wrote: Thu Mar 30, 2023 11:54 am With Fidelity, I was given the name and postal address of the fund manager in another similar situation, but the fund manager's postal mailing address was in the central US, not in Boston.
With your Fidelity question, did you receive an answer from the fund manager, and was it what you expected and in acceptable detail?
I did receive a lengthy and quite adequate written response from the office of the Fidelity fund manager, not from him but from someone in his area. I was quite pleased. I asked Vanguard today whether the fund manager at Vanguard would tend to respond to questions from fund holders via postal mail. He did not want to say, but I did prevail on him to check with his supervisor I don't want to waste time mailing to a dead letter box. The investment contact is supposed to call me back on this.
I wouldn't have expected such a useful response from Fidelity (or Schwab, etc.) so I'll be interested to know if Vanguard replies to your request for at least contact information.
OP said he got an adequate response form Fidelity but didn't quote what it was. Based on detailed posts from Nisiprius and others, I doubt the usefulness of any letter which is likely to become "stale" as soon as it is printed. One of the posters indicated how bond fund composition and interest rate changes necessitate almost daily reassessment of deflation risk. This is why I suggested the creation of a live spreadsheet to assess the deflation risk in VAIPX (and similar funds). For example, some BH created an excel sheet to compare the yields of Treasury, single-state and multi-state municipal money market funds at various tax rates which a lot of folks find quite useful. In fact, OP themselves indicated in one of the messages that the calculations are simple :-)

Boglesmind
I was asked by someone else on this post if Fidelity had responded to a complex question about one of their bond funds, when I sent that question to a Fidelity fund manager. The answer was yes, but the specifics of that answer, having to do with dividends, have no relevance in this forum and this chain, which is why I did not provide any details here.
As I think I mentioned elsewhere in this post, the calculations themselves do seem like they would be simple in general nature, yes, although not easy or brief. I am far from sure if the layout below is adequate.
Column numbers, with the leftmost column listing all the TIPS holdings by name:
1. All TIPs holdings in the fund as of a given date.
2. For each holding the current inflation adjusted par value.
3. For each holding the original par value, no inflation adjustment included. Presumably this would be near $1,000.
4 For each holding the inflation adjusted par value divided by the at issue par value, expressed as a percent.
5. For each holding a weighting percent that holding is of total holdings of the fund, using the two par values added up.
6. A calculated weighted average percent of the fund's inflation adjusted par increase divided by total inflation adjusted value.
Lastly, I would like to compare the VAIPX across two or three or four TIPs funds.
One reason I do not want to do this myself is that I could easily make a conceptual error, so I cannot confirm my results, if the fund does not publish one.
A second reason is that I believe that investors at some point need to be aware of deflation risk, and be able to compare TIPS funds for this, and my own private efforts toward a possibly right answer will not help them. Deflation gets not much attention right now, except for probably Gary Shilling, which is why this question is not being much asked. If deflation appears or is believed to possibly appear, I expect a good deal of talk about deflation risk in TIPs funds, but that is an 'if'.
I have nothing more to add to this post, I suspect, and I may stop posting. If someone is inclined to run with these numbers, more power to them, but that will not be me. Thanks to everyone for the helpful comments.
tonyclifton
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Joined: Sat Feb 08, 2020 4:25 pm

Re: [Assessing Deflation Risk in VAIPX - Vanguard Inflation-Protected Securities fund]

Post by tonyclifton »

OP, could you just calculate your deflation risk for one individual TIPS and then extrapolate to the fund? If you find the risk in one you should find the risk in all.
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Beensabu
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Re: Vanguard run-around on Fixed Income questions

Post by Beensabu »

grok87 wrote: Thu Mar 30, 2023 3:46 pm
it's a good thought but i don't think it works. this calc would help you get "inflation-adjusted par".
I didn't realize that. Thank you!

Is the "face amount" in the annual report also inflation-adjusted? Or is that the original principal value? It's 78.2% of market value as of Dec 31, 2022.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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