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Until now, Canadians have had a limited range of fixed income products to choose from—many offering exposure to just a small slice of the market. For example, some products include only government or corporate bonds or mortgage-backed securities. Others are actively managed mutual funds, which are significantly more expensive.
And given the nature of the Canadian economy, home bias (especially in fixed income) is a significant challenge too.
Traditionally, Canadian investors (and their advisors) have managed both issues by trading multiple fixed income products. However, this approach is complex and requires a sophisticated level of knowledge about the fixed income market.
Add to the equation the tendency to invest in active fixed income products with equity-like risk profiles and many investors are missing the safeguard fixed-income products are supposed to provide.
VGAB, Vanguard's new Global Aggregate Bond Index ETF, is that safeguard.
Benefits include access to more than 15,000 global, investment-grade fixed income securities spanning every sector of economy. In addition, VGAB offers automatic rebalancing and management by Vanguard–one of the largest fixed income managers in the world and a pioneer in the space.
Protecting portfolios with fixed income since 1986
The inspiration for VGAB came from a desire to give Canadian investors access to a global aggregate bond index, something that already exists in every other major ETF market in the world.
Vanguard's investment philosophy factored into the decision, too. “We have always championed a global strategy for equities,” said Scott Johnston, Head of Product at Vanguard Canada. “But global exposure in fixed income is just as important, so we are excited to bring VGAB to market.”
As always, helping Canadian investors keep more of their money in their pockets was our prime motivator.
VGAB accomplishes this goal in a number of ways:
Single-ticket solution, taking the stress out of fixed income investing for investors and advisors alike
ETF composed of two Vanguard low-cost aggregate bond ETFs (US Aggregate Bond Index ETF, ticker VBU; and Global ex-US Aggregate Bond Index ETF, ticker VBG–both hedged to the Canadian dollar), providing access to ~15,000 high-quality fixed income securities for a fee of only .30%
Expertly managed by Vanguard with total transparency
With VGAB, there's no need to spend time researching and rebalance the fixed-income side of your clients' portfolios. It's all done for you by our experienced team of fixed income experts, and without any mystery.
Most importantly, investors benefit from much-needed diversification—the best protection against market volatility—in the easiest, most cost-effective way possible. “And in today's low-yield environment, costs matter more than ever,” added Johnston.
The views expressed in this material are based on the authors' assessment as of the first publication date (January 2020), are subject to change without notice and may not represent the views and/or opinions of Vanguard Investments Canada Inc. The authors may not necessarily update or supplement their views and opinions whether as a result of new information, changing circumstances, future events or otherwise.
This material is for informational purposes only. This material is not intended to be relied upon as research, investment, or tax advice and is not an implied or express recommendation, offer or solicitation to buy or sell any security or to adopt any particular investment or portfolio strategy. Any views and opinions expressed do not take into account the particular investment objectives, needs, restrictions and circumstances of a specific investor and, thus, should not be used as the basis of any specific investment recommendation.
In this material, references to "Vanguard" are provided for convenience only and may refer to, where applicable, only The Vanguard Group, Inc., and/or may include its affiliates, including Vanguard Investments Canada Inc.
All investments, including those that seek to track indexes, are subject to risk, including the possible loss of principal. Diversification does not ensure a profit or protect against a loss in a declining market. While ETFs are designed to be as diversified as the original indexes they seek to track and can provide greater diversification than an individual investor may achieve independently, any given ETF may not be a diversified investment.
Investments in bonds are subject to call risk, credit risk, income risk and interest rate risk. Please see the Vanguard fund's prospectus for a description of the unique risks applicable to bond investing.