Core bond vs core plus

Core bond vs core plus DEFAULT

Cash, Core and Core-Plus Bond Funds, and Other 'Meh' Diversifiers

Cash was the best-performing holding in many investors' portfolios last year--and in my model portfolios, too. Even as the U.S. stock market dropped 5% and the Bloomberg Barclays U.S. Aggregate Bond Index barely clung to a gain, investors in money market funds and other cash products pocketed yields of as much as 2%. And because cash investments don't lose value, cash investors didn't experience the net asset value shrinkage that many bond investors ran into last year.

But despite its heroic showing in 2018, has cash delivered as a diversifier for stocks over longer time frames? Not as much as Treasury bonds or the Aggregate Index have, based on a follow-up look at data depicting the correlations between stocks and various other asset classes.

Yet an even more surprising finding was that many bond funds that investors use as core fixed-income holdings weren't all that great as equity diversifiers, either. Such funds, which land in the intermediate core bond and intermediate core-plus bond Morningstar Categories, often hold substantial corporate-bond exposure. As a result, their performance has often moved in sympathy with the equity market.

Reading Correlations
In an article this week, I assembled asset correlation charts with an eye toward depicting which categories had delivered the best diversification benefit for a plain-vanilla U.S. equity portfolio, as represented by the S&P 500. I included small-cap stocks, foreign stocks, bonds, and a grab-bag of "alternatives" categories, including managed futures, long-short equity, commodities, and precious-metals equities. Over nearly every time period examined, Treasury bonds exhibited the lowest correlation to the S&P 500's performance. From a practical perspective, that means that Treasury bonds tended to perform poorly when stocks were soaring (the better part of the past decade), but they held their ground when stocks fell.

There are intuitive explanations for this contrary performance pattern. Equity-market shocks are often characterized by a "flight to quality," and U.S. Treasuries are typically viewed as a global safe haven. Moreover, serious U.S. equity market downturns sometimes result from extreme weakness in the economy, with the global financial crisis a recent case in point. In such environments, the Federal Reserve often takes steps to drive interest rates down. Because they have no credit risk, Treasuries tend to be direct beneficiaries of such rate adjustments (and feel the pain most acutely when rates go up).

In the latest data run, I decided to add in some additional categories to test their efficacy as diversifiers: cash, as discussed above, as well as Morningstar's newly created intermediate core bond and intermediate core-plus bond categories, as well as funds focused on inflation-protected bonds, utilities, master limited partnerships, and preferred stocks. As was the case with the other data series, I examined the data over various trailing periods, including one-, three-, five-, 10-, and 15 years. These asset correlation charts are available in Morningstar Direct, a software product geared toward professional investors.

To find the correlation between two assets on the charts, find the intersection between them on the horizontal and vertical axes. For example, you can examine the S&P 500's correlation with all of the other asset classes by running down the vertical "1" column. A correlation coefficient of 1 indicates that two assets are perfectly correlated, while a correlation coefficient of negative 1 indicates a perfect inverse relationship. Finally, a correlation coefficient of 0 indicates no correlation at all.





Cash and Other Bonds
As noted above, cash wasn't a particularly strong diversifier for U.S. equity exposure, despite its stalwart showing in 2018. While the correlation between stocks and money market funds is lower over the 15-year period than over shorter time frames, over most trailing periods it hovered right around 0.0--an indication of no correlation. Nor would I necessarily have expected there to be a relationship. After all, money market funds maintain stable NAVs; the cash investor's whole return consists of yield. Thus, the only way that money market investments could maintain a consistently negative correlation with stocks would be if money market yields consistently went up when stock prices dropped, and vice versa. 

Perhaps more striking than the cash/stock correlation was how much worse intermediate core bond and intermediate core-plus bond funds were as diversifiers for equities relative to more-Treasury-heavy bond indexes. Morningstar introduced the intermediate core bond and intermediate core-plus bond categories at the beginning of May 2019. Funds that previously landed in the intermediate-term bond category are now mapped into one of the two new categories. As Morningstar's director of fixed-income strategies Sarah Bush explains, core bond funds tend to focus on investment-grade U.S. bonds, whereas core-plus bond funds have more latitude to invest in below-investment-grade debt and may also invest in emerging-markets debt and non-U.S.-dollar debt and currencies. Funds in the intermediate core-plus bond category have, not surprisingly, exhibited a higher correlation to the U.S. stock market than those in the intermediate core bond category over all trailing periods, but neither category was especially great at diversifying equity exposure. Treasuries showed much better as diversifiers, as did  iShares Core U.S. Aggregate Bond ETF(AGG), which, like all Bloomberg Barclays U.S. Aggregate Bond Index trackers, places a heavy emphasis on government bonds.

I also examined a handful of other categories to assess their ability to diversify equity exposure. Inflation-protected bonds, as represented by mutual funds that invest in them, were underwhelming as equity diversifiers. Ditto for funds that invest in utilities and MLPs.

The most effective diversifier of all, based on a negative correlation coefficient with the S&P 500, were bear-market mutual funds. Such funds generally short stocks in an effort to deliver performance that runs counter to the market's. They can rack up strong gains in periods of market tumult, but over more buoyant--or even normal--periods of time, the results can be painful. Over the past decade, for example, the average bear-market fund has experienced annualized losses of 16% per year. 

Takeaways
Does that mean you should throw your core- or core-plus bond fund overboard? Not necessarily. While venturing beyond government bonds may reduce these funds' ability to diversify, they may be able to make it up on the upside. Over the past decade, for example, core-plus bond funds have handily beaten the Aggregate Index, as well as intermediate-term Treasury funds, by a sizable margin. (Intermediate core bond funds look less compelling, as a group.) It's also important to emphasize that just because an asset type has a positive correlation with another, that doesn't mean its gains or losses will match the other asset type's in magnitude. While many core-plus bond funds posted losses during 2008, for example, those losses were generally in the low- to mid-single digits. The S&P 500, meanwhile, shed 37% of its value.

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Sours: https://www.morningstar.com/articles/930643/cash-core-and-core-plus-bond-funds-and-other-meh-diversifiers

For Bond Funds, Is Core-Plus Really a Minus?

If you're looking to fill out your portfolio's fixed-income sleeve, the intermediate core bond and intermediate core-plus bond Morningstar Categories are logical places to start. Both categories are home to funds that invest in a diversified mix of intermediate-maturity investment-grade U.S. bonds, including Treasuries, mortgage-backed securities, and corporate bonds. Thus, they afford investors exposure to a big swath of the U.S. bond market in one fell swoop, with core-plus funds going further afield than core funds into areas like high-yield bonds, bank loans, and foreign currencies. These funds have proved to be popular with investors; the two categories combined were home to nearly $1.7 trillion in assets as of March 31, 2020.

Similar but Different
While the two groups look similar on the surface, the recent market sell-off has brought some important differences into stark relief. In the first quarter of 2020, the average intermediate core bond fund gained 1.49%, whereas the typical intermediate core-plus bond fund lost 1.19%. Why the divergence? Investors fled lower-quality assets for the safety of Treasuries, which were by far the best-performing fixed-income sector for the quarter. Since core-plus bond funds by definition go beyond Treasuries, it means they held more of these lower-quality bonds than core bond funds did. Indeed, investment-grade corporates were down about 3.6% for the quarter, and high-yield corporates were down even more, with losses of 12.7%.

We can clearly see the relationship between first-quarter performance and credit quality in the chart below, which sorts funds in both the intermediate core and intermediate core-plus categories based on their average credit quality. Core-plus funds have shown similar patterns during previous downturns, such as the commodity and high-yield market sell-offs in the second half of 2015 and early 2016.

The Yield Advantage
Of course, there are some areas where the intermediate core-plus bond category has the edge. Income generation is one. The average intermediate core-plus fund paid out 2.77% in income over the trailing 12 months ended April 30, 2020, compared with 2.42% for the typical intermediate core fund. Thanks to widening credit spreads, this yield advantage looks even more compelling now. The average SEC yield--an annualized income figure based on distributions made over the past 30 days--for intermediate core-plus funds was 2.4% as of April 30, compared with just 1.9% for intermediate core funds.

This extra income has also translated into stronger long-term returns. Over the past 10 years, intermediate core-plus funds have generated annualized returns of 4.01%, compared with 3.57% for intermediate core funds. However, this return advantage has also brought higher risk, as this year's losses for intermediate core-plus funds attest.

Role in Portfolio
Because of their exposure to riskier corners of the fixed-income market, intermediate core-plus bond funds also don't excel as portfolio diversifiers. Over the past three years, the category has shown a stronger correlation with equity market benchmarks than other fixed-income categories, such as intermediate core bond and government bond. Indeed, the average intermediate core-plus fund has a correlation of 0.36 with the S&P 500, compared with just 0.12 for the intermediate core category. When the going gets tough in equities, intermediate core-plus funds are likely to feel pain at the same time. While some investors might be able to tolerate this trade-off in exchange for extra yield, it's important to keep the downside in mind.

From a portfolio construction standpoint, a key question is what role you want your fixed-income holdings to play. If you're looking for a buffer against volatility in down markets, other fixed-income categories are better suited for that role. The intermediate core bond category has a number of strong performers, such as Morningstar Medalists Vanguard Total Bond Market Index (VBMFX), Fidelity U.S. Bond Index (FXNAX), and Baird Aggregate Bond (BAGSX). High-quality municipal-bond funds can also make sense for the taxable portion of a portfolio, particularly now that taxable-equivalent yields have edged up from earlier this year. From a diversification perspective, intermediate and long-term Treasuries are the most effective way to offset equity risk, although their rock-bottom yields may lead to lower returns going forward. If you're approaching retirement or already in retirement, you'll probably want to include some Treasury Inflation-Protected Securities exposure to help offset the risk of future inflation.

If you're looking for higher yield and long-term returns, an intermediate core-plus bond fund can fill a legitimate role in your portfolio. But as this year's performance illustrates, it's important to understand the trade-offs--and make sure you're willing to tolerate occasional losses when riskier fixed-income assets are out of favor.

Sours: https://www.morningstar.com/articles/984007/for-bond-funds-is-core-plus-really-a-minus
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Vanguard Core-Plus Bond Fund launches

A new bond fund has been added to our lineup of active fixed income products: Vanguard Core-Plus Bond Fund (Admiral™ Shares VCPAX, Investor Shares VCPIX). The fund differs from other fixed income products in its focus on riskier areas of the fixed income markets. Vanguard Core-Plus Bond Fund seeks to generate higher returns while still providing the broad exposure of a core bond fund.

You can invest in the fund during our subscription period, which began yesterday, October 12. During the subscription period, all Investor Shares are available for $10 per share and all Admiral™ Shares are available for $20 per share. Purchases made during the subscription period will be held in a custody account until October 25, 2021. On that date, the fund will start investing using its stated strategy. The fund’s minimum investment amounts are $3,000 for Investor Shares and $50,000 for Admiral Shares.

Compare to our other core bond offerings

The fund features:

Exposure to high-yield investments
The Core-Plus Bond Fund differs from Vanguard Core Bond Fund by seeking higher performance, particularly through greater exposure to riskier bonds like high-yield corporates and emerging markets debt. It’s expected to have greater volatility of returns and diverge from its benchmark more than the Core Bond Fund. Due to the fund’s higher risk level, carefully weigh how it aligns with your personal risk tolerance as a fixed income investor.

Chart demonstrating the risk level of conservative funds to aggressive funds. Core-Plus Bond Fund falls under Conservative to Moderate

Potential for outperformance
Vanguard Fixed Income Group will act as the fund’s investment advisor. With more than 190 tenured investment professionals, our Fixed Income Group’s deep specialization and collaborative culture serve as the foundation of its investment process and fuel its active edge. The fund will strive to outperform its benchmark* by continuously changing the amount of the portfolio invested in different, often riskier, sub-sectors―including high-yield securities, emerging markets debt, and corporate bonds. Vanguard Core-Plus Bond Fund places a greater emphasis on seeking outperformance through allocation to riskier sectors than Vanguard Core Bond Fund.

Active management
Professional fund managers will proactively monitor and adjust fixed income allocations to meet changing market conditions. “Vanguard has invested heavily in active management for decades, resulting in a lineup of active bond funds that helps clients achieve investment success,” said Kaitlyn Caughlin, head of Vanguard Portfolio Review Department. Vanguard’s track record as a bond manager remains unparalleled—96% of our active fixed income funds outperformed their peer-group averages over the 5 years ended June 30, 2021.**

Diversification
The Core-Plus Bond Fund provides the diversification of a well-rounded bond fund and can help reduce risk relative to high-yield products and equities. With exposure to a variety of sectors, credit qualities, and security types, this actively managed fund will invest primarily in taxable investments, including Treasury, mortgage-backed, and other U.S. investment-grade securities. It will also invest moderately in other riskier areas like high yield and emerging markets. You can use it as your only bond holding or combine it with our other bond funds for a more customized balance of risk and return.

Low costs
The fund will offer 2 low-cost share classes: Admiral Shares and Investor Shares, with estimated expense ratios of 0.20% and 0.30%, respectively. The average asset-weighted expense ratio of funds in the Morningstar intermediate core-plus bond category was 0.48% as of June 30, 2021, making our Core-Plus Bond Fund a low-cost leader in its category.

Compare core bond offerings
Vanguard Total Bond Market Index Fund, Vanguard Core Bond Fund, and Vanguard Core-Plus Bond Fund are all fixed income funds that invest in taxable securities. They’re income-producing products, so investing in them may have tax implications, but you can use them in both tax-advantaged accounts, like IRAs, and taxable accounts. Consider consulting with a financial and/or tax advisor regarding, among other issues, the choice to hold your fixed income allocation through a tax-advantaged or taxable account. All 3 funds can serve as the centerpiece of an investor’s fixed income allocation.

The Total Bond Market Index Fund is the most conservative option for investors favoring index management. While still conservative, the Core Bond Fund offers the potential to outperform through active management. With greater exposure to high-yield and emerging markets investments, the new Core-Plus Bond Fund is designed for investors who are more comfortable with higher risk in their fixed income allocation and are seeking the potential to outperform through active management.

Here’s how the 3 funds compare:

Chart that compares Vanguard Total Bond Market Index Fund, Vanguard Core Bond Fund, and Vanguard Core-Plus Bond Fund. Vanguard Total Bond Market Index Fund is an index fund with 0% allocation to high yield. Its benchmark is Bloomberg U.S. Aggregate Float Adjusted Index. Vanguard Core Bond Fund is an active fund with 5% max allocation to high yield. Its benchmark is Bloomberg U.S. Aggregate Float Adjusted Index. Vanguard Core-Plus Bond Fund is an active fund with 35% max allocation to high yield. Its benchmark is Bloomberg U.S. Universal Total Return Index.

With the diversification of bonds and the potential for higher returns, Vanguard Core-Plus Bond Fund could be an ideal active fixed income option to help create long-term value for your portfolio.


*The fund will strive to outperform Bloomberg U.S. Universal Total Return Index.

**For the 5-year period ended June 30, 2021, 49 of 51 Vanguard active bond funds outperformed their Lipper peer-group average. Results will vary for other time periods. Only actively managed bond funds with a minimum 5-year history were included in the comparison. Source: Lipper, a Thomson Reuters Company. The competitive performance data shown represent past performance, which is not a guarantee of future results. View fund performance

"Vanguard Core-Plus Bond Fund launches", 5 out of 5 based on 840 ratings.
Sours: https://investornews.vanguard/vanguard-core-plus-bond-fund-launches/
The advantages of a core plus diversifier

Vanguard Announces Plans to Launch Two New Active Bond Funds

Firm Also Reopens Wellington Fund

VALLEY FORGE, PA (July 29, 2021)—Vanguard today filed initial registration statements with the U.S. Securities and Exchange Commission to introduce two new active fixed income funds: Vanguard Core-Plus Bond Fund and Vanguard Multi-Sector Income Bond Fund. The funds are designed to meet the needs of clients seeking actively managed “core” and “satellite” bond portfolios and will augment the lineup of higher-alpha, diversified fixed income strategies managed by Vanguard Fixed Income Group.

“Vanguard has invested heavily in active management talent and capabilities for decades, resulting in a lineup of active bond funds that leverage proven portfolio manager expertise and help clients achieve investment success,” said Kaitlyn Caughlin, head of Vanguard Portfolio Review Department. “Vanguard’s client-centric approach to product development has produced a carefully curated line-up that drives long-term value and meets evolving investor needs.”

The new funds represent Vanguard’s ongoing efforts to improve investor outcomes through single-fund fixed income strategies with enduring investment merit and low costs. Core-Plus Bond will consist of a broadly diversified portfolio invested primarily in Treasury, mortgage-backed, and other U.S. investment-grade securities. In addition, the fund may invest beyond the U.S. investment-grade bond market in areas such as high-yield corporate securities and emerging markets debt of all credit quality ratings. Core-Plus Bond will be differentiated from Vanguard Core Bond Fund in its incremental flexibility across higher-alpha potential sectors, particularly in its greater exposure to high-yield and emerging markets. The fund will have an estimated expense ratio of 0.30% for Investor Shares and 0.20% for Admiral Shares, compared with an average expense ratio of 0.48% for industry peers1.

Multi-Sector Income Bond will offer exposure primarily to U.S. investment-grade securities, U.S. high-yield corporate securities, and emerging markets debt of all credit quality ratings. Multi-Sector Income Bond will have an estimated expense ratio of 0.40% for Investor Shares and 0.30% for Admiral Shares, compared with an average expense ratio of 0.98% for industry peers1.

Vanguard expects to make Core-Plus Bond available to investors in the fourth quarter of 2021 and Multi-Sector Income Bond available for public investment at a later date.

A global fixed income leader

The fund will be managed by Vanguard’s Fixed Income Group, a global team of more than 190 tenured and dedicated professionals overseeing $2.1 trillion. For nearly 40 years, Vanguard Fixed Income Group has been distinguished in the industry by its deep investment capabilities, disciplined security selection process, rigorous risk management techniques and strong long-term performance.

The firm has placed a particular focus on investing in its active bond portfolio management capabilities and product offer, including Vanguard Global Credit Fund, Vanguard Emerging Markets Bond Fund, and Vanguard Core Bond Fund. As a result, Vanguard’s track record as a bond manager remains unparalleled—76% of Vanguard fixed income funds and 96% of Vanguard active fixed income funds outperformed their peer group averages over the five years ending June 30, 20212.

Reopening Vanguard Wellington Fund

Vanguard also announced today that, due to improved fund liquidity and capacity, the firm will reopen Vanguard Wellington Fund to all investors immediately. The fund is managed by Wellington Management Company LLP and has been closed to new financial advisory, institutional, and intermediary investors since 2013.

Vanguard dedicates considerable resources to the oversight of its fund lineup, ensuring clients have access to sound, lasting investment products that meet their long-term needs. As part of this process, Vanguard will occasionally close certain funds to protect existing shareholders from high levels of cash flow.

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About Vanguard

Vanguard is one of the world’s largest investment management companies. As of June 30, 2021, Vanguard managed $8.0 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 418 funds to its more than 30 million investors worldwide. For more information, visit vanguard.com.

Asset figures as of June 30, 2021 unless otherwise noted.

1 Source: Morningstar, Vanguard.

2 For the five-year period ending June 30, 2021, 83 of 109 bond funds and 49 out of 51 active bond funds outperformed their peer group averages. Results will vary for other time periods. Only funds with a minimum five-year history were included in the comparisons. (Source: Lipper, a Thomson Reuters Company). Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit our website at www.vanguard.com/performance.

Registration statements relating to Vanguard Core-Plus Bond Fund and Vanguard Multi-Sector Income Bond Fund have been filed with the Securities and Exchange Commission (SEC) but have not yet become effective. The SEC has not approved or disapproved these securities or passed upon the adequacy of either fund’s preliminary prospectus. Any representation to the contrary is considered a criminal offense. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statements become effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.

For more information about Vanguard funds, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. Investments in bonds are subject to interest rate, credit, and inflation risk. High-yield bonds generally have medium- and lower-range credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings

Investments in securities issued by non-U.S. companies and governments are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.

Vanguard Marketing Corporation, Distributor.

Sours: https://pressroom.vanguard.com/news/Press-Release-Vanguard-Announces-Plans-to-Launch-Two-New-Active-Bond-Funds-072921.html

Core vs core plus bond

Core Plus

What Is Core Plus?

Core plus is an investment management style that permits managers to augment a core base of holdings, within a specified-objective portfolio, with instruments that have greater risk and greater potential return. Funds that utilize this strategy are called core-plus funds.

Core plus funds are typically associated with fixed-income funds, adding alternative investments such as high-yield, global, and emerging market debt to a core portfolio of investment-grade bonds. Core plus equity funds also exist with a similar strategy: They use alternative investments to enhance the return from a core market segment.

key takeaways

  • Core plus is an investment management style that permits managers to augment a core base of holdings with instruments that offer greater risk but greater potential return.
  • Core plus investment strategies are primarily associated with fixed income funds.
  • Equity funds can also use core plus strategies.

Understanding Core Plus

Core plus investment strategies are primarily associated with fixed income funds. They give a fund manager some flexibility to enhance returns from investments beyond the core objective of a fund. The securities used for these extra returns are typically also fixed-income investments, that are often riskier, but potentially more rewarding, than the fund’s core holdings.

Investment advisors in a core plus fund will build its primary assets specifically around securities that meet a specified objective. This portion of the portfolio is designed to be maintained as a long-term investment, with the intention of holding securities virtually forever. Such holdings might represent as much as 75% of the portfolio. The remaining balance would then consist of higher-risk holdings, which may have shorter investment horizons than the core components of the portfolio. As such, a portfolio's core investments would represent a solid foundation to which more aggressive, diversified investments could be added. 

Examples of Core Plus Investments

Core plus funds can feature either fixed income or equity investments. All information is accurate as of July 2021.

JPMorgan Core Plus Bond Fund (ONIAX)

The JPMorgan Core Plus Bond Fund (ONIAX) is one example of a core plus fixed income. The Fund invests primarily in investment-grade bonds, but it has the flexibility to tactically invest 35% of the portfolio’s assets in securities outside this central category that have enhanced return potential. The Fund typically invests these enhancement assets in high-yield fixed income and foreign debt. Total assets in the Fund equal $16.7 billion in July 2021. The class A share of the Fund requires a minimum investment of $1,000. The Fund has a gross annual expense ratio of 0.90%.

American Century Core Plus Fund (ACCNX)

The American Century Core Plus Fund is another example of a core plus fixed-income investment. The Fund invests primarily in high-quality, intermediate corporate bonds with five-to-ten-year maturity. But it also invests up to 35% of the overall portfolio in alternative fixed income investments outside of the core holdings—such as lower-grade, "junk bonds"—to maximize the income. The Fund’s investor share has a $2,500 initial investment requirement. The Fund has a total expense ratio of 0.56%. The assets were worth $467.0 million as of July 2021.

JPMorgan U.S. Large Cap Core Plus Fund (JLCAX)

The JPMorgan U.S. Large Cap Core Plus Fund exemplifies an equity core-plus fund. While the Fund centers the majority of its core portfolio around the buying and holding of U.S. large-capitalization companies that it deems undervalued, it also has the ability to sell short such equities to achieve additional returns over its benchmark, the S&P 500 Index. The fund assets equal $4.6 billion. It has a minimum investment of $1,000 and a gross expense ratio of 2.11%.

Sours: https://www.investopedia.com/terms/c/coreplus.asp
CLEARFIL™ DC CORE PLUS + CLEARFIL™ UNIVERSAL BOND QUICK

Coming soon: Vanguard Core-Plus Bond Fund

We’re introducing a new bond fund to our lineup of active fixed income products: Vanguard Core-Plus Bond Fund. Designed to be an all-in-one bond solution for your overall portfolio, it has a conservative-to-moderate risk profile. You can use it as your only bond holding or combine it with our other bond funds for a more customized balance of risk and return.

The fund will launch on October 25. However, you’ll have the opportunity to invest in it early during a subscription period that will start on or around October 12.

Here’s how the new fund fits into our lineup—and may fit your portfolio.

Vanguard Core-Plus Bond Fund seeks to offer:

Outperformance

Our Fixed Income Group will pursue outperformance of the fund’s benchmark* by investing in carefully selected taxable fixed income securities, including those in high-yield corporates and emerging markets debt. Over the past 10 years, more than 88% of our actively managed funds performed better than their peer-group averages.**

Active management

For nearly 40 years, Vanguard Fixed Income Group has been distinguished in the industry by its deep investment capabilities, disciplined security selection process, and rigorous risk management techniques. These experienced fund managers will seek to proactively monitor and adjust fixed income allocations to meet changing market conditions.

Diversification

Even with interest rates at historic lows, bonds still play an important role in your portfolio by helping to add stability to your asset mix. Our Core-Plus Bond Fund will invest across multiple areas of the fixed income market. As an active, diversified centerpiece of your fixed income allocation, it could potentially add balance to your portfolio—while still aiming for higher yields.

Conservative to moderate risk profile

The Core-Plus Bond Fund differs from the Vanguard Core Bond Fund by seeking higher performance, particularly through greater exposure to riskier bonds like high-yield corporates and emerging markets debt. It’s expected to have greater volatility of returns and diverge from its benchmark more than the Core Bond Fund. Consider how the fund’s higher risk level aligns with your personal risk tolerance as a fixed income investor.

Low costs

With estimated expense ratios of 0.20% (Admiral™ Shares) and 0.30% (Investor Shares), the Core-Plus Bond Fund is expected to be less expensive than other funds in the category. The average asset-weighted expense ratio of funds in the Morningstar core-plus bond category was 0.48% as of June 30, 2021.

Read about our latest investing perspectives

Read more

*The fund will strive to outperform Bloomberg Barclays U.S. Universal Total Return Index.

**For the 10-year period ended June 30, 2021, 7 of 7 Vanguard money market funds, 39 of 44 Vanguard bond funds, 6 of 6 Vanguard balanced funds, and 31 of 37 Vanguard stock funds―for a total of 83 of 94 Vanguard funds―outperformed their Lipper peer-group averages. Results will vary for other time periods. Only actively managed funds with a minimum 10-year history were included in the comparison. Source: Lipper, a Thomson Reuters Company. The competitive performance data shown represent past performance, which is not a guarantee of future results. View the most recent fund performance

"Coming soon: Vanguard Core-Plus Bond Fund", 5 out of 5 based on 351 ratings.
Sours: https://investornews.vanguard/coming-soon-vanguard-core-plus-bond-fund/

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