Vanguard this week announced plans to introduce two international bond index funds for U.S. investors. The two funds -- Vanguard Total International Bond Index Fund and Vanguard Emerging Markets Government Bond Index Fund -- are expected to be available in the first quarter of 2012 pending review of the registration statements by the SEC.
The funds are intended to provide broad exposure to the international fixed- income market, the company said in a press release.
Justin McCarthy, a certified financial planner with RR Advisory Group, a New York-based wealth management firm, noted that international bond funds are helpful for financial advisors looking to diversify their clients’ fixed-income exposure.
Vanguard’s proposed Total International Bond Index Fund will seek to track the investment performance of the Barclays Global Aggregate ex-USD Float Adjusted Index, which comprises more than 7,000 global government, agency and corporate securities in 57 countries in Asia, Europe, North America and South America.
Unlike the majority of international bond funds offered today, the Total International Bond Index Fund will employ currency-hedging strategies to protect against foreign- exchange-rate fluctuations, Vanguard noted in its press release.
Vanguard’s Emerging Markets Government Bond Index Fund will seek to track the investment performance of the Barclays Emerging Markets Sovereign Index, which features approximately 200 government bonds in 39 countries. The fund will invest solely in U.S. dollar-denominated international bonds, which will eliminate currency risk for U.S.-based investors.
Vanguard expects to offer both conventional and ETF shares of the new funds, with estimated expense ratios ranging from .25% to .50%. The Total International Bond Index Fund and the Emerging Markets Government Bond Index Fund will assess purchase fees of .25% and .75%, respectively, on the conventional shares.
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