Vanguard enters active bond space

Vanguard enters active bond space

Vanguard has made a foray into the actively managed fixed income space with the launch of a global credit fund that seeks to undercut other providers in the market.

The Vanguard Global Credit Bond fund will invest in a diversified portfolio on investment grade corporate debt, as well as government agency bonds and those from supranational organisations.

The fund will levy an ongoing charge (OCF) of 0.35 per cent for its investor share classes, with Vanguard saying this was less than the amount charged by all other active retail funds offered in Morningstar's global credit bond category in the UK.

According to FE Analytics, the average OCF in the IA Sterling Corporate Bond sector is 0.56 per cent and ranges from 0.14 to 1.45 per cent, which includes some passive vehicles.

Paul Malloy, head of fixed income for Vanguard in Europe, said: "Investors should also pay close attention to costs, as the impact of fees is amplified in a low-yield market environment.

"An important element is the universe the fund will invest in will typically have lower volatility than high yield bonds or equities, helping to offset a portfolio’s return volatility."

The persistence of low yields has created a headache for bond fund providers, some of whom have struggled to adapt to this dynamic.

Last year Goldman Sachs analysis pointed to the fact that one in four corporate bond funds in Europe had yields that amounted to less than their annual fees.