Index fund and exchange-traded fund (ETF) giant Vanguard said that it is planning to introduce the Vanguard Total World Bond ETF. "The ETF will be the industry's first U.S.-domiciled index product offering investors access to the entire global investment-grade bond universe in a single portfolio," said Pennsylvania-based Vanguard in a statement out Monday.
The Vanguard Total World Bond ETF is expected to debut in the third quarter and will use an ETF of ETFs structure, an approach Vanguard previously applied with the Vanguard Total Corporate Bond ETF (VTC). VTC, which debuted in November, holds Vanguard's other three corporate bond ETFs – the Vanguard Short-Term Corporate Bond ETF (VCSH), Vanguard Intermediate-Term Corporate Bond ETF (VCIT) and Vanguard Long-Term Corporate Bond ETF (VCLT). (See also: Vanguard Doing Vanguard Things With New Bond ETF.)
The new Vanguard Total World Bond ETF will have two holdings – the Vanguard Total Bond Market ETF (BND) and the Vanguard Total International Bond ETF (BNDX). Home to $36.5 billion in assets under management as of the end of April, BND is one of the largest fixed income ETFs in the U.S. The ETF holds 8,400 bonds with an average duration of 6.1 years. BNDX is a currency hedged ETF that holds nearly 4,900 ex-U.S. bonds, most of which are issued by developed market economies. BNDX has an average duration of 7.9 years. The portfolios for BND and BNDX comprise investment-grade bonds.
"With the Total World Bond ETF, Vanguard will be the first firm to offer U.S. investors a single index product with exposure to the entire global investment-grade bond universe," said Vanguard Chief Investment Officer Greg Davis in the statement. "It will be simple, convenient, and highly diversified, with an expense ratio in line with our current low-cost fixed income ETFs."
When it comes to market, the Vanguard Total World Bond ETF will follow the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index. The new ETF will keep with the Vanguard tradition of low fees with an annual expense ratio of just 0.09%, or $9 on a $10,000 investment. Vanguard is the second largest U.S. ETF sponsor. (For more, see: April Was a Banner Month for Fixed Income ETFs.)