John Bogle’s almost evangelical zeal for passive strategies often masks the fact that he does nonetheless advocate for the inclusion of active strategies, when appropriate, in the firm he founded. For those that know their history, Bogle himself oversaw the launch of many active Vanguard funds―starting with the Windsor Fund in 1958, right up until the time of his retirement with the Horizon Funds in 1995.
In fact, one third of the firm’s assets are currently invested in active funds.
Add one more active fund to the mix. The investment behemoth introduced Vanguard Core Bond Fund on Thursday, an actively managed fund which it says brings a low-cost entrant to the core bond fund category.
The new fund offers two share classes—Investor Shares and Admiral Shares—featuring expense ratios “well below the core bond fund category average expense ratio of 0.80 percent.”
“Vanguard Core Bond Fund invests primarily in high-quality bonds across the investment-grade market, including Treasury, mortgage-backed, corporate and asset-backed securities of varying yields and maturities,” Gregory Davis, head of Vanguard Fixed Income Group, said in a statement. “The fund will limit its exposure to non-investment grade bonds to 5 percent. We believe the fund to be well-suited for investors seeking an actively-managed, high-quality, and broadly diversified holding in their fixed income portfolio.”
Vanguard Core Bond Fund is similar to Vanguard Total Bond Market Index Fund, providing exposure to investment-grade bonds and broad diversification with an intermediate-term average maturity. The fund, however, differs in that it is actively managed, employs a risk-controlled approach, and seeks to outperform the broad-investment-grade U.S. fixed income market through disciplined security selection, sector allocation, and duration decisions.
As one of the world’s largest fixed income managers, Vanguard Fixed Income Group manages approximately $950 billion in global assets. The group began managing bond funds in 1981 and currently manages 51 index and active bond funds and money market funds in the U.S., 16 index and active bond funds in Europe, 11 index and active funds in the Australia, and 5 index bond funds in Canada.
Three portfolio managers will manage the fund:
- Gregory S. Nassour, co-head of Vanguard Investment Grade Credit Group and portfolio manager for the Vanguard Ultra-Short-Term Bond Fund, Vanguard Short-Term Investment-Grade Fund, and Vanguard Variable Insurance Fund Portfolios
- Brian Quigley, portfolio manager for the Vanguard Short-Term Federal Fund
- Gemma Wright-Casparius, head of the Treasury/Inflation Group and portfolio manager for Vanguard Inflation-Protected Securities Fund, Vanguard Short-Term Inflation-Protected Securities Index Fund, Vanguard Intermediate-Term Treasury Fund, and Vanguard Long-Term Treasury Fund
The managers have a combined 71 years of investment management experience and 42 years of Vanguard experience.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
