Vanguard, one of the world's leaders in index investing, has opened its proprietary Vanguard Emerging Markets Bond Fund to outside investors. The bond fund gives investors exposure to fixed income assets in emerging markets and is the latest in Vanguard's actively managed offering. The fund, which Vanguard set up in March 2016 for its own investing, has stakes largely in U.S. dollar-denominated debt issued by governments and government-owned businesses in emerging markets.
"The Emerging Markets Bond Fund further broadens our active and global fixed income lineup," said John Hollyer, global head of Vanguard Fixed Income Group, the fund's advisor, in a press release. "The fund is a more specialized offering supported by a globally integrated team of experienced investment professionals in the United States, London and Hong Kong." The Vanguard Emerging Markets Bond Fund uses the J.P. Morgan EMBI Global Diversified Index as its benchmark and invests in government and government-backed enterprises in Mexico, Russia, China, Turkey and Indonesia. There are two share classes available: Admiral shares (VEGBX) have an expense ratio of 0.45%, while the Investor share class (VEMBX) have an expense ratio of 0.60%.
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The move to launch an actively managed emerging markets bond fund comes at a time when the king of index investing is getting more into active funds and ETFs. In late November, Vanguard announced that it is launching a suite of ETFs that are actively managed and tied to well-known market factors. The six new ETFs and one mutual fund are slated to be available by the middle of February, with Vanguard Quantitative Equity Group acting as the investment advisor for the new products.
The new funds include the Vanguard U.S. Value Factor ETF, which will invest in stocks that have lower share prices relative to their fundamentals; the Vanguard U.S. Quality Factor ETF, which will invest in companies that have strong fundamentals; the Vanguard U.S. Momentum Factor ETF, which will invest in stocks that have strong recent performance; the Vanguard U.S. Liquidity Factor ETF, which will invest in stocks that have low trading liquidity; and the Vanguard U.S. Minimum Volatility ETF, which will invest in companies that have lower volatility than the broader U.S. equity market. Meanwhile, the Vanguard U.S. Multifactor ETF and Vanguard U.S. Multifactor Fund Admiral Shares will both invest in stocks that have strong recent performance, strong fundamentals and low prices relative to their fundamentals.
Sticking to its low-cost strategy, outside of the U.S. Multifactor ETF and mutual fund, which have expense ratios of 0.18%, the new ETFs carry expense ratios of 0.13%. There are no minimum investment requirements for the factor-based ETFs, Vanguard noted.