Vanguard is entering the international bond market with the introduction of two new international bond index funds and ETFs.
The new offering is the company's first international fixed-income offering for U.S. investors.
Vanguard Total International Bond Index Fund will seek to track the investment performance of the Barclays Global Aggregate ex-USD Float Adjusted Index (Hedged), according to Vanguard. The target benchmark comprises 7,000 global government, agency and corporate securities in 57 countries in Asia, Europe, Canada and South America.
The new fund will employ currency hedging strategies, entering into various currency transactions to protect against uncertainty in future exchange rates, according to Vanguard. By hedging currency exposure, the fund's investment returns are expected to more closely correlate with the underlying performance of international bonds without currency distortions.
The Vanguard Emerging Markets Government Bond Index Fund will seek to track the investment performance of the Barclays Emerging Markets Sovereign Index (USD). The target benchmark features about 200 government bonds in 39 countries. By investing solely in U.S. dollar-denominated international bonds, the fund will not subject U.S.-based investors to currency risk, according to Vanguard.
Vanguard expects to offer both conventional shares and ETF shares of the new funds with expense ratios ranging from 0.25% to 0.50%.