Vanguard Files for First High-Yield Bond ETF
- Vanguard’s new fund would invest in high-yielding, higher-risk corporate bonds.
- Other firms are also looking to offer investors access to junk bonds in the convenient, low-cost ETF wrapper.
Vanguard is planning to enter the junk bond exchange-traded fund market with the Vanguard High-Yield Active ETF Shares (VGHY), according to a Securities and Exchange Commission filing on Tuesday.
The new ETF is the fund giant’s first entry into the junk bond area of the ETF market per Bloomberg, which reported that these types of funds have attracted roughly $11.6 billion so far in 2025.
VGHY’s proposed fee is 0.22%, and the filing is set to come into effect September 15.
Vanguard’s First High-Yield Bond ETF Offering
Vanguard’s new fund would invest in high-yielding, higher-risk corporate bonds with medium- and lower-range credit quality ratings. The fund would invest at least 80% of its assets in corporate bonds that are rated below Baa by Moody’s Ratings, have an equivalent rating by another ratings agency or are considered to be of a comparable quality by the fund’s advisor, according to the SEC filing.
It can’t invest more than 20% of its assets, in aggregate, in investment-grade debt securities, U.S. Treasury securities, convertible securities, preferred stocks and fixed- and floating-rate loans of medium- to lower-range credit quality.
In a world where yields are higher than average and some equity valuations may be stretched, high-yield credit is more likely to offer an attractive opportunity to generate total returns and income, Sam Martinez, head of active fixed-income product at Vanguard, told etf.com via an emailed statement.
He added that adding high-yield fixed income to an optimized 60/40 multi-asset portfolio enhances risk-adjusted returns and that the higher the risk of default in the high-yield bond sector presents “a great opportunity for a world-class active high-yield team to outperform using deep fundamental research.”
The Growing Junk Bond Market
As Aniket Ullal, head of ETF research at CFRA, explained to etf.com, “There is already $117 billion invested in high-yield bond ETFs in the U.S., but 85% of those assets are invested in indexed products. In his investor letter earlier this year, Vanguard CEO Salim Ramji had identified active fixed income as an opportunity for growth. The asset-weighted average fee for an active fixed-income ETF is 3.4 times that of an indexed fixed-income ETF, which opens up opportunities for a low-cost provider like Vanguard in the active space.”
But Vanguard is far from the only firm looking to offer investors access to junk bonds in the convenient, low-cost ETF wrapper.
Last week, JPMorgan Chase & Co. (JPM) launched the JPMorgan Active High Yield ETF (JPHY)—the largest active ETF launch in history, according to the company. Capital Group also launched its first high-yield bond ETF, the Capital Group High Yield Bond ETF (CGHY), last week.
Editor's note: Story has been updated to add a comment from CFRA's Aniket Ullal.
