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Vanguard Adds To Fixed Income Lineup With Total World Bond ETF

ETF Professor

Last week, the second-largest U.S. issuer of exchange traded funds added to its lineup of fixed income ETFs with the debut of the Vanguard Total World Bond ETF (NASDAQ: BNDW).

BNDW, which launched Sept. 6, is the total world cousin of the popular Vanguard Total Bond Market ETF (NYSE: BND).

What Happened

As of July 31, BND had $36.4 billion in assets under management, making it one of the largest U.S.-listed fixed income ETFs.

The new ETF tracks the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index and is structured as an ETF of ETFs, an approach Vanguard uses with the Vanguard Total Corporate Bond ETF (NASDAQ: VTC), which debuted last November.

Why It's Important

BNDW's holdings are the aforementioned BND and the Vanguard Total International Bond ETF (NASDAQ: BNDX).

“This structure enables the Vanguard Total World Bond ETF to achieve immediate scale by using existing exposure from the underlying ETFs and is expected to result in tighter bid-ask spreads and lower operating expenses than investing directly in the benchmark’s constituents,” Pennsylvania-based Vanguard said in a statement.

BNDW charges 0.09 percent per year, or $9 on a $10,000 investment, making it cheaper than 90 percent of rival funds, according to issuer data. The new ETF's lineup is primarily comprised of investment-grade debt.

What's Next

“With BNDW, Vanguard is the first firm to offer U.S. investors a single index product with exposure to the entire global investment-grade bond universe,” Vanguard Chief Investment Officer Greg Davis said in the statement. “It’s a simple, convenient and low-cost way to obtain the diversification benefits offered by bonds of many countries and issuers.”

BND is a domestic fund, while BNDX allocates 56.70 percent of its weight to European bonds. 

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