Vanguard Core-Plus Bond Fund launches

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

You can invest in the fund during our membership period, which started yesterday, October 12th. 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 kept in the custody account until October 25, 2021. From that date, the fund will start investing using its stated strategy. The fund’s minimum investment amount is $3,000 for Investor Shares and $50,000 for Admiral Shares.

Compare with our other top bond offerings

Fund Features:

Exposure to high-yield investments
Core-plus differs from bond funds Vanguard Core Bond Fund By seeking higher performance, especially through increased exposure to riskier bonds such as high-yield corporates and emerging market debt. The returns from its benchmark are expected to have higher volatility and divergence from its benchmark as compared to the core bond fund. Due to the high risk level of the fund, watch carefully how it aligns with your personal risk tolerance as a fixed income investor.

Chart showing the risk level of conservative funds to aggressive funds.  Core-Plus Bond Fund Comes Under Conservative to Moderate

better performance potential
Vanguard will act as investment advisor to the Fixed Income Group Fund. With over 190 tenured investment professionals, the deep expertise and collaborative culture of our fixed income group serves as the foundation of its investment process and fuels its active growth. The fund will strive to outperform its benchmark* by continually changing the amount of portfolio invested in different, often risky, subsectors, which include high-yield securities, emerging market debt and corporate bonds. The Vanguard Core-Plus Bond Fund places a greater emphasis on outperformance through allocation to riskier sectors than the Vanguard Core Bond Fund.

active management
Professional fund managers will continuously monitor and adjust the fixed income allocation to meet the changing market conditions. “Vanguard has invested heavily in active management for decades, resulting in a lineup of active bond funds that help clients achieve investment success,” said Caitlin Coughlin, head of the 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 average for the 5 years ended June 30, 2021.**

Diversity
A core-plus bond fund provides the diversification of a well-rounded bond fund and can help reduce the relative risk of high-yield products and equities. With exposure to a variety of sectors, credit properties, and security types, this actively managed fund will primarily invest in taxable investments, including Treasury, mortgage-backed and other U.S. investment-grade securities. It will also invest modestly in other riskier sectors such as high yield and emerging markets. You can use it as your sole bond holding or combine it with our other bond funds for a more optimized balance of risk and return.

Less cost
The fund will offer 2 low-cost share classes: Admiral Shares and Investor Shares, with projected expense ratios of 0.20% and 0.30%, respectively. Funds in the Morningstar Intermediate Core-Plus Bond Category had an average asset-weighted expense ratio of 0.48%, making our Core-Plus Bond Fund a low-cost leader in its category as of June 30, 2021.

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 are income-generating products, so investing in them can have tax implications, but you can use them in both tax-advantaged accounts, such as IRAs, and taxable accounts. Consider consulting a financial and/or tax advisor regarding the option of keeping your fixed income allocation through a tax-advantaged or taxable account, among other issues. All 3 funds can serve as the focal point of an investor’s fixed income allocation.

A total bond market index fund is the most conservative option for investors in favor of index management. While still conservative, the core bond fund offers the potential to outperform through active management. With a greater exposure to high-yield and emerging market investments, the new Core-Plus bond fund is designed for investors who are more comfortable with higher risk in their fixed income allocation and outperform through active management. Looking for capability.

Here’s how the 3 funds compare:

Chart that compares the Vanguard Total Bond Market Index Fund, Vanguard Core Bond Fund, and Vanguard Core-Plus Bond Fund.  The Vanguard Total Bond Market Index Fund is an index fund with a 0% allocation for high yields.  Its benchmark is the Bloomberg US Aggregate Float Adjusted Index.  Vanguard Core Bond Fund is an active fund with a 5% maximum allocation for high yield.  Its benchmark is the Bloomberg US Aggregate Float Adjusted Index.  Vanguard Core-Plus Bond Fund is an active fund with a 35% maximum allocation for high yield.  Its benchmark is the Bloomberg US Universal Total Return Index.
The Bloomberg US Universal Total Return Index is a broad extension of the Bloomberg US Aggregate Total Return Index (AGG). It is a US dollar-denominated, primarily investment-grade credit quality benchmark that includes AGG as its core component of approximately 83%, but covers approximately 7% for 144a securities (private placements), high-yield corporate Bonds are also included. About 5%, debt to emerging markets about 3% and Eurodollar bonds around 2%. This benchmark is not float-adjusted, meaning it includes securities held by a Federal Reserve SOMA account, or that are not available for purchase on the open market. This benchmark was chosen because of its broad exposure to the Vanguard Core-Plus Bond Fund and its clear allocation of high-yield corporate bonds, which are excluded from the benchmarks of both the Vanguard Bond Market Index Fund and the Vanguard Core Bond Fund. All exposure data is as of August 31, 2021.

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


*The fund will attempt to outperform the Bloomberg US Universal Total Return Index.

**For the 5-year period ended June 30, 2021, 49 out of 51 Vanguard Active Bond Funds outperformed their Lipper peer-group average. Results for other time periods will vary. In comparison only actively managed bond funds with a history of at least 5 years were included. Source: Lipper, Thomson Reuters Company. The competitive performance data shown represents past performance, which is not a guarantee of future results. View Fund Performance

notes:

This fund may not be in the best interest of investors who have a low risk tolerance in their fixed income allocation.

For more information about Vanguard Funds, visit investors.vanguard.com to obtain a prospectus or, if available, a summary prospectus. The investment objectives, risks, fees, expenses, and other important information about a fund are contained in the prospectus; Read it carefully and consider before investing.

All investments are subject to risk, including the potential loss of the money you have invested. Diversification does not ensure profit nor protect against loss.

Bond funds are subject to the risk that an issuer will fail to make payments on time and that bond prices will decline due to rising interest rates or a negative perception of the issuer’s ability to pay.

The US government’s endorsement of Treasury or agency securities applies only to the underlying securities and does not prevent share-price fluctuations. Unlike stocks and bonds, US Treasury bills are guaranteed in the form of timely payment of principal and interest. High-yield bonds typically have medium- and low-grade credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings. Bonds of companies located in emerging markets are subject to national and regional political and economic risks and the risk of currency fluctuations. These risks are especially high in emerging markets.

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