Vanguard Total Int'l Bond Fund Nears Launch

May 01, 2013

Vanguard’s much-anticipated international bond fund is now very near its launchpad.

Vanguard, the third-largest ETF provider by assets, appears to be quite close to launching its Vanguard Total International Bond Fund, from the looks of regulatory filings.

The firm again updated the prospectus for the international aggregate bond fund, which it has previously said was going to be launched by the end of the second quarter.

The latest filing provides additional details on the fund that’s designed to track the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (dollar hedged), and will tap into a universe of 7,000 high-quality corporate and government bonds from 52 countries.

The latest ETF—which, like all Vanguard ETFs, will be a share class of a broader mutual fund—will have a 0.20 percent expense ratio, less than the 0.30 percent the company originally projected.

International bond funds are growing in popularity with investors, who increasingly look to the segment for income-generating diversification as well as helping to mitigate overall portfolio volatility.

The index underlying the strategy caps single-issuer exposure at 20 percent, and issuers that individually represent more than 5 percent of the mix may not constitute, in the aggregate, more than 48 percent of the overall portfolio, according to the filing.

By hedging currency exposure, Vanguard said the fund’s returns should more closely correlate with the underlying performance of international bonds without currency distortions. The fund will maintain a dollar-weighted average maturity between five and 10 years, and is currently closer to eight years.

The investment-grade international bond portfolio will be available in a mutual fund wrapper in the “Investor,” “Admiral” and “Institutional” share classes for 0.23 percent, 0.20 percent and 0.12 percent, respectively. That would make the “Institutional” share class the only category cheaper than the ETF.

All of these planned fees have been lowered from earlier projections of 0.40 percent, 0.30 percent and 0.25 percent, respectively.

 

 

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