Vanguard Global Bond Index and Vanguard Global Corporate Bond Index added to the Wealth Shortlist

The Vanguard Global Bond Index and Vanguard Global Corporate Bond Index funds were added to the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential on 15 December 2021.

Vanguard Global Bond Index provides exposure to a range of fixed income investments. Its benchmark, the Bloomberg Barclays Global Aggregate Index, includes investment-grade bonds with maturities greater than one year. It focuses on bonds issued by global governments, though overall it’s made up of a mixture of global government, corporate and securitised bonds.

Vanguard Global Corporate Bond Index provides exposure to a range of fixed income corporate debt. Its benchmark, the Bloomberg Barclays Global Aggregate Corporate Index, includes bonds issued by companies from across the globe. It mainly invests in the industrial, utilities and financial sectors.

Both funds aim to track their respective benchmarks by investing in a portion of the underlying bonds, a process known as partial replication. This helps to keep costs down as the funds don’t buy every bond that is added to the index. The funds also have the flexibility to invest in higher-risk emerging markets, though these bonds have tended to make up a small part of the funds.

Vanguard is a pioneer when it comes to passive investing, having created the first retail index fund over 40 years ago. It now runs some of the biggest index funds in the world. Given its size, it has a large investment team with the expertise and resources to help its funds track indices and markets as closely as possible, while having scale to keep costs down.

These funds are run by a large global team that is spread across three investment hubs around the world – the US, UK and Australia. The team-based approach means there’s no named managers on either fund.

Vanguard aims to put the client at the forefront of everything it does, which drives its focus on quality, low-cost index products. Jack Bogle founded Vanguard in 1975 and is owned by investors. This allows Vanguard to redirect its profits back to investors in the form of lower fees, instead of paying dividends to external shareholders.

The team also uses currency hedging in these funds to convert overseas currency bonds back to sterling. The prices and income of global bonds can fluctuate alongside foreign currency movements, adding volatility for UK investors. By using hedging, investors could experience less extreme price movements over time, which helps smooth returns. This could provide a different type of return and help diversify an investment portfolio that already has exposure to company shares or overseas currencies. This can be achieved using derivatives which can add risk where used.

Following detailed analysis of Vanguard’s investment approach and several meetings with the team, our conviction has grown, and we recently added both funds to the Wealth Shortlist. We like the group’s experience and believe these options offer investors a way to diversify their portfolio using index funds. As the currency of overseas bonds is hedged back to sterling, we expect the fund’s performance to be less volatile over time compared to an equivalent unhedged fund.

However, like all investments, they can fall as well as rise in value so there are no guarantees. You could get back less than you invest.

Read our latest Vanguard Global Bond Index research update

Read our latest Vanguard Global Corporate Bond Index research update

Scroll across to see the full table.

Past performance is not a guide to the future. Source: Lipper IM 30/11/2021.

N/A means performance for this period isn’t available.

Find out more about the Vanguard Global Bond Index fund, including charges

Vanguard Global Bond Index Key Investor Information

Find out more about the Vanguard Global Corporate Bond Index fund, including charges

Vanguard Global Corporate Bond Index Key Investor Information