A Simple ETF to Access the Global Investment-Grade Bond Universe
This article was originally published on ETFTrends.com.
Vanguard has rounded out its global fixed-income ETF suite with a new low-cost world bond ETF of ETFs that combines the global investment-grade universe.
On Thursday, Vanguard launched the Vanguard Total World Bond ETF (NasdaqGM:BNDW) , which has a 0.09% expense ratio.
The Vanguard Total World Bond ETF tries to reflect the performance of the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index, which is comprised of investment-grade U.S. bonds and investment-grade non-U.S. dollar-denominated bonds taken from the Bloomberg Barclays U.S. Aggregate Float Adjusted Index and the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged), according to the fund's prospectus.
BNDW acts as an ETF of ETFs and will obtain its exposure by investing in two Vanguard bond ETFs, the Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX) .
This combination provides broad exposure to the global investment-grade fixed-rate debt market, including government, corporate and securitized debt, all with maturities of more than one year. As of the end of June, BNDW's underlying index held approximately 44% U.S. bonds and 56% non-U.S. bonds.
According to Vanguard, the new ETF's direct investment in existing Vanguard bond ETFs allows the fund to achieve immediate scale and access to the global investment-grade bond market. Furthermore, the ETF of ETFs structure allows BNDW to closely track the returns of the benchmark by keeping the expense ratio and transaction costs lower for investors.
"With BNDW, Vanguard is the first firm to offer U.S. investors a single index product with exposure to the total global investment-grade bond universe," Vanguard Chief Investment Officer Greg Davis said in a note. "It's a simple, convenient, and low-cost way to get the diversification benefits that exposure to bonds of many countries and issuers can offer."
For more information on new fund products, visit our new ETFs category.
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