Mallika Mitra
2 min read
Vanguard has a new actively managed fixed-income exchange-traded fund joining its lineup of low-cost funds: the Vanguard Multi-Sector Income Bond ETF (VGMS).
On Wednesday, the fund giant launched VGMS, which is designed to add total return potential while generating higher income with exposure to a range of fixed-income sectors, including investment-grade credit, high-yield corporates, emerging markets bonds and structured products, according to a press release. VGMS comes with an expense ratio of 0.3%.
Multi-sector is an exposure that many investors will use in their portfolio for several reasons, Rebecca Venter, senior fixed-income product manager at Vanguard, explained to etf.com. The first reason the firm sees most commonly is that investors want to complement a higher-quality core allocation with a credit enhancement.
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Powered by Money.com - Yahoo may earn commission from the links above.“Multi-sector, through the VGMS ETF, is a means for investors to enhance their yield and get credit exposure by giving Vanguard the reins to figure out where's the best place to allocate across credit,” Venter added.
The second key reason is that investors—particularly those in the later stages of their investment horizons—need fixed income to be a large part of their portfolio and generate a significant level of income. VGMS, she added, can fill that role for them as it invests “across the credit markets actively and dynamically” and is designed to find the best income opportunities using Vanguard’s team of active experts.
“When you're taking that level of credit risk, it's helpful to have an active approach to make sure you're separating the winners from the losers,” Venter said.
VGMS marks Vanguard’s seventh actively managed fixed-income ETF in the U.S. The firm already offered a mutual fund, the Vanguard Multi-Sector Income Bond Fund Admiral Shares (VMSAX).
“We view multi-sector income as one of the most important and helpful areas for investors to turn to in active—It’s a very large active category and, as a category, it's nearly 100% actively managed,” Venter said. But investors increasingly prefer the ETF vehicle.
“We already have the team, the capabilities and the product design in place in the mutual fund structure. So this is just an exciting way to continue to fill out our active ETF lineup.”
