Vanguard launches Total World Bond ETF

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Vanguard has launched Vanguard Total World Bond ETF (BNDW), describing it as the industry’s first US-domiciled index ETF offering investors access to the global investment-grade bond universe in a single fund.

The new ETF trades on Nasdaq and seeks to track the Bloomberg Barclays Global Aggregate Float Adjusted Composite Index. It has an estimated expense ratio of 0.09 per cent.
The fund is structured as an ETF of ETFs, investing directly in two Vanguard building-block bond ETFs: Vanguard Total Bond Market ETF (BND) and Vanguard Total International Bond ETF (BNDX). The firm writes that 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. The approach is similar to Vanguard Total Corporate Bond ETF (VTC), which launched in November, 2017, and invests in Vanguard’s existing short-, intermediate-, and long-term corporate bond ETFs.

“With BNDW, Vanguard is the first firm to offer US investors a single index product with exposure to the entire global investment-grade bond universe,” says Vanguard Chief Investment Officer Greg Davis. “It’s a simple, convenient, and low-cost way to obtain the diversification benefits offered by bonds of many countries and issuers.”
The firm writes that Vanguard Total World Bond ETF may also serve as a complement to Vanguard Total World Stock ETF (VT) in investors’ portfolios. VT is Vanguard’s global equity index offering and the industry’s largest global equity ETF at more than USD12.4 billion in assets. By combining these two ETFs, investors can now achieve a globally diversified portfolio of more than 20,000 stocks and bonds at an estimated asset-weighted expense ratio of less than 10 basis points.

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