Vanguard unveils short-term bond index fund

Vanguard Asset Management has launched a short-term bond index fund, taking its range of bond index offerings to 17.

The Vanguard Global Short-Term Bond Index fund, which has a total expense ratio of 0.2 per cent on its sterling share classes, will track the Barclays Global Aggregate 1-5 Years ex-US MBS Float Adjusted Bond Index.

The portfolio will be managed on a hedged basis to help reduce currency movement volatility and preserve the risk-return profile offered by the underlying asset class.

Vanguard says the fund is aimed at investors who want a low-cost index fund to help manage interest rate, currency and credit risk. It could also help to diversify bond exposure across different countries’ interest rate environments and across a global set of issuers.

In tracking the Barclays Global Aggregate 1-5 Years ex-US MBS Float Adjusted Bond Index, the fund will be invest in a “broad universe” of government, investment-grade corporate, government-related and securitised ex-US mortgage-backed bonds.

Vanguard head of product for international business Axel Lomholt says: “Today’s launch reflects our belief that a broadly diversified fixed income investment has an important role to play in a balanced portfolio in any interest rate environment.

“Not only do global short-term bonds provide stability and diversification, they also play a valuable role in protecting the downside risk of portfolios.”