Vanguard Global Bond Index Income (Hedged GBP)

The fund aims to track a broad range of good-quality global bonds. Since launch it's tracked its benchmark closely. As you would expect from an index tracker fund, it's fallen behind the benchmark over the long term because of the costs involved in running the fund such as dealing charges and spreads. However, the techniques used by the team have helped to keep performance as close to the benchmark as possible and reduced the fund's tracking difference. Given Vanguard's size, experience and expertise, we expect the fund to continue to track the benchmark well in the future, though there are no guarantees. As the currency of overseas bonds is hedged back to sterling, we expect the funds performance to be less volatile over time compared to an equivalent unhedged fund.

Tracker funds are one of the simplest ways to invest. They aim to match the performance of an index, rather than beat it. They usually do this by investing in as many companies as possible in the index. This means they don't need analysts to research individual companies, which keeps costs to a minimum. If the fund's costs are low, it's likely to track the index more closely.

The fund invests in nearly half of the number of constituents in the Bloomberg Global Aggregate Index, which is known as partial replication. This helps to keep costs down as the fund doesn't buy and sell every bond that is added to or removed from the index. While the team doesn't invest in every bond, the fund has tended to track its index closely as the team aims to replicate the broader characteristics of the index. For example, they select bonds that together help the fund to closely match the benchmarks credit rating or yield to maturity. A bonds credit rating is an assessment of the ability to pay back it's debt, while the yield to maturity is the total expected return if the bond is held until it matures. The fund also has the flexibility to invest in higher risk emerging markets if they see fit. Vanguard's global team provides 24-hour market access and consistent fund and bond price monitoring. The team also has access to local bond traders and these relationships can help the team find bonds at attractive prices. Please note as this is an offshore fund you are not normally entitled to compensation through the UK Financial Services Compensation Scheme.