In today’s low-rate environment, many fixed income investors are diversifying their portfolios with debt markets overseas. Vanguard offers two compelling options on this front.
Capturing income from debt markets outside the U.S allows investors to access credit profiles from different countries that are in various stages of their respective economic cycle. Additionally, fixed income investors have peace of mind knowing that both offerings from Vanguard focus on investment-trade debt.
First up, there’s the Vanguard Total World Bond ETF (BNDW). BNDW seeks to track the performance of the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index that measures the investment return of investment-grade U.S. bonds and investment-grade non-U.S. dollar-denominated bonds.
BNDW is ideal for investors who want exposure to debt markets outside the U.S., but do not want to completely disregard fixed income in the United States. In essence, the ETF provides more of a global aggregate bond fund.
Highlights of BNDW:
- Exposure to the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index.
- Broad, diversified exposure to the global investment-grade bond market.
- Unique ETF of ETFs structure.
- Intermediate-duration portfolio, with exposure to short-, intermediate-, and long-term maturities.
- Current income with high credit quality.
Venturing Outside the U.S.
For a purer play on the debt markets overseas, there’s the Vanguard Total International Bond Index Fund ETF Shares (BNDX ). BNDX seeks to track the performance of a benchmark index that measures the investment return of non-U.S. dollar-denominated investment-grade bonds.
As mentioned, international bonds can provide a diversification tool for fixed income investors looking to supplement their current core portfolio. The ETF employs an indexing investment approach designed to track the performance of the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged), which provides a broad-based measure of the global, investment-grade, fixed-rate debt markets.
Highlights of BNDX:
- Attempts to track the performance of the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged).
- Employs hedging strategies to protect against uncertainty in exchange rates.
- Provides a convenient way to get broad exposure to non-U.S. dollar denominated investment-grade bonds.
- Is passively managed, using index sampling.
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