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.
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.
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.
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.**
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.
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.
The Bloomberg U.S. Universal Total Return Index is a broader extension of the Bloomberg U.S. Aggregate Total Return Index (the Agg). It is a U.S. dollar-denominated, primarily investment-grade credit quality benchmark that includes the Agg as its main component at about 83%, but also includes additional exposure to 144a securities (private placements) at about 7%, high-yield corporate bonds at about 5%, emerging markets debt at about 3%, and Eurodollar bonds at about 2%. This benchmark is not float-adjusted, meaning it includes securities held by the Federal Reserve SOMA account, or those not available for purchase on the open market. This benchmark was selected for Vanguard Core-Plus Bond Fund due to its broader exposures and explicit allocation to high-yield corporate bonds, which are excluded from the benchmarks of both Vanguard Bond Market Index Fund and Vanguard Core Bond Fund. All exposure data is as of August 31, 2021.
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
This fund may not be in the best interest of investors with low risk tolerance in their fixed income allocation.
For more information about Vanguard funds, visit investor.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.
U.S. government backing of Treasury or agency securities applies only to the underlying securities and does not prevent share-price fluctuations. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest. 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. Bonds of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.