Sara Devereux, global head of Vanguard’s Fixed Income Group, thinks “we’re in a new era for fixed income.” And she believes that it’s an era “that’s going to generate higher returns over the long run.”
Appearing on Bloomberg ETF IQ, Devereux said that “returns are very attractive compared to where they’ve been in recent history.”
“We think there’s going to be a lot more opportunity in fixed income in general,” she added. To take advantage of these opportunities, investors with a higher risk tolerance may want to consider active management.
Benefit From Active Management With VCRB
Devereux admitted that while index funds “are a great starting point,” active ETFs are good for investors “seeking to beat the benchmark.”
The reason for this is twofold. One, volatility has been running high. But volatility creates dispersion which active managers can monetize. The second reason is that we’re entering what Devereux described as an “uneven economic environment.” And in such an environment, it’s good to use “research teams to do deep dives on each individual company.”
So, for investors with a higher tolerance for risk looking to beat the benchmark, the Vanguard Core Bond ETF (VCRB ) may be worth considering.
The actively managed VCRB seeks to provide broadly diversified exposure predominantly to the U.S. investment-grade bond market. The fund invests in U.S. Treasuries, mortgage-backed securities, and corporate bonds of varying yields and maturities.
The fund’s managers use a disciplined, risk-controlled approach with its security selection, sector allocation, and duration decisions. VCRB charges 10 basis points.
Vanguard CEO Tim Buckley said, “The best way to evaluate” an active manager is to see “what their edge is.”
“What is their active edge? It has to be one that can’t be easily duplicated,” Buckley said at Exchange 2023. “You want one edge that nobody else has.”
For more news, information, and analysis, visit the Fixed Income Channel.