By Toni Weeks
San Diego, Oct. 31 - Vanguard said it has filed registration statements with the Securities and Exchange Commission for two new funds, the Vanguard Total International Bond Index Fund and the Vanguard Emerging Markets Government Bond Index Fund.
According to a press release, the Vanguard Total International Bond Index Fund will seek to track the investment performance of the Barclays Global Aggregate ex-USD Float-Adjusted Index (Hedged), which is comprised of more than 7,000 global government, agency and corporate securities in 57 countries. The fund will employ currency hedging strategies, entering into various currency transactions to protect against uncertainty in future exchange rates. Hedging currency exposure results in a closer correlation between the fund's investment returns and the underlying performance of international bonds without currency distortions. According to Lipper, Inc. data, most international bond funds offered today do not use hedging strategies.
"The new Vanguard Total International Bond Index Fund will provide a low-cost way to obtain diversified exposure to one of the world's largest asset classes," chief executive officer Bill McNabb said in the release.
The Vanguard Emerging Markets Government Bond Index Fund will seek to track the investment performance of the Barclays Emerging Markets Sovereign Index (USD), which features about 200 government bonds in 39 countries. Because it invests only in dollar-denominated international bonds, it will not subject U.S.-based investors to currency risk.
The funds will be managed by Vanguard's Fixed Income Group.
Vanguard said it will offer its Investor, Admiral and Institutional conventional shares as well as ETF shares of the new funds, with estimated expense ratios ranging from 0.3% to 0.5%. To help offset the transaction costs associated with international bonds, the Total International Bond Index Fund and the Emerging Markets Government Bond Index Fund will assess purchase fees of 0.25% and 0.75%, respectively, on the conventional shares. The fees are detailed in the table below.
Vanguard has its headquarters in Valley Forge, Pa.
Minimum initial Total International Bond Emerging Markets Government Bond
| Shares | investment | Estimated expense ratio | Estimated expense ratio
|
| Investor | $3,000 | 0.4% | 0.5%
|
| Admiral | $10,000 | 0.3% | 0.35%
|
| Institutional | $5 million | 0.25% | 0.3%
|
| ETF | 0.3% | 0.35%
|
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