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Vanguard launches low cost bond index funds

Vanguard launches low cost bond index funds

Vanguard has expanded its range of low-cost fixed income products with the launch of two Ucits, corporate bond funds.

The Vanguard Global Corporate Bond Index fund offers low-cost access to investment grade debt issued by companies in both developed and developing markets worldwide. 

The Vanguard Global Short-Term Corporate Bond Index fund is a passive option for investors seeking exposure to one to five-year duration corporate bonds.

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Both funds track Bloomberg Barclays’ indices.

Paul Malloy, head of fixed income for Vanguard in Europe, said: “We are committed to lowering the cost of investing in the UK, and doing so in a way that empowers investors to make choices appropriate to their investment objectives, and appetite for risk.

“These new funds sit alongside our existing range of indexing tracking fixed income mutual funds and ETFs, as well as our recently launched active Vanguard Global Credit fund, in providing options for investors looking to put together balanced, diversified, long-term portfolios.”

Back in May Hargreaves Lansdown’s share price fell by nearly 8 per cent, before recovering, following the launch of Vanguard’s low-cost direct-to-consumer service.

Vanguard’s direct-to-consumer online service charges an annual account fee of just 0.15 per cent.

Darius McDermott, managing director of Chelsea Financial Services, said the funds are nice and cheap but investors need to be aware of what they will be investing in: countries and companies with the biggest debts will make up the biggest part of an index. 

He said: “Whether they are more or less able to service these debts will not be a consideration. This means they have a very different risk profile to an actively managed bond fund.”

Laith Khalaf, senior analyst at Hargreaves Lansdown, said he didn’t foresee a great deal of interest from retail investors for a global corporate bond fund at the present time, with the prospects of rising interest rates likely to be a headwind for fixed interest markets. 

However he said he suspected there will be continued institutional demand for these kinds of product.

emma.hughes@ft.com