Emerging market sovereign debt is becoming an increasingly popular allocation in investor portfolios. Confronted with such a diverse universe, fixed income investors have access to the dynamic approach and rigorous risk management framework provided by the Emerging Markets Bond Fund, all at Vanguard’s characteristic low cost.
A bottom-up approach, focused on security selection and relative value opportunities
A proven track record of limiting downside risk
Designed for outperformance – without relying on overall market direction
Emerging market bonds can deliver investors a number of key features, including robust risk-adjusted returns and attractive yield generation within a credit portfolio. An active approach grounded in fundamental research, tight risk controls and seeking diversified sources of alpha can help consistently give investors these qualities from emerging market debt.
Watch this two-minute video to find out why.
US dollar denominated Emerging market sovereign bonds have become a significant segment of global bond markets in recent years. We believe the asset class can play a valuable role in client portfolios, offering strong risk-adjusted returns and attractive yields as well as diversification against traditional credit and equity risk.
It is an area teeming with opportunity – and the Emerging Markets Bond Fund’s managers aim to achieve consistent long-term outperformance by identifying diversified sources of alpha while avoiding the potential for significant drawdowns, with a bias towards liquidity.
Sourcing the best opportunities to enhance yield while managing credit risk requires a flexible and robust approach that can allocate to fixed income securities of varying maturities, yields and qualities.
The fund’s benchmark is the J.P. Morgan EMBI Global Diversified Index, which promotes lower concentration than other funds in the peer group. The fund typically has 250-300 holdings, primarily across diverse emerging market sovereign bonds denominated in US dollars. However, it has the flexibility to invest in local currency and corporate bonds, and maintains liquidity to ensure it can capitalise on opportunities as they arise.
It is run by one of the largest and most experienced active fixed income investors in the world. Vanguard’s Fixed Income Group emphasises rigorous and consistent portfolio construction, driven by powerful quantitative tools and in-depth analysis to achieve highly controlled and cost-effective investment results for clients.
To help mitigate currency risk, the fund hedges returns back to sterling or euros through available share classes.
“Emerging market sovereign bonds are an increasingly popular holding within investors’ fixed income credit allocations because we believe the asset class presents some of the best opportunities for risk-adjusted, consistent alpha generation in global bond markets.”
Emerging Markets Lead Strategist, Vanguard, Europe.
Benchmarked against the J.P. Morgan EMBI Global Diversified Index, which contains the same constituents as its parent index but spreads allocations more broadly across securities, which better aligns with our investment approach.
Our heritage in active fund management dates back to the year we were founded – 1975. For almost half a century we have strived to provide consistent returns while limiting downside risk.
Uses a dynamic and tightly risk-controlled approach to generate long-term, consistent levels of outperformance.
The fund is managed by one of the largest and most experienced active fixed income investors in the world.
Our teams are solely focused on our mutual fund range – not stretched across multiple investment vehicles or mandates.
Our scale helps us to provide value to investors with an ongoing charge of 0.60% versus an industry peer group average of 1.05%*.
* Source: Vanguard and Morningstar. Data as at 31 March 2023. The ongoing charges figure (OCF) refers to the Investor GBP hedged Acc share class. The OCF covers the fund manager’s costs of managing the fund. It does not include dealing costs or additional costs such as audit fees. Morningstar peer group average OCF for IA Sector = Global Emerging Market Bond - Hard Currency.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.
Investments in smaller companies may be more volatile than investments in well-established blue chip companies.
Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.
The Vanguard Emerging Markets Bond Fund may use derivatives, including for investment purposes, in order to reduce risk or cost and/or generate extra income or growth. For all other funds they will be used to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Funds net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.
Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.
For further information on risks please see the “Risk Factors” section of the prospectus on our website.
This document is directed at professional investors and should not be distributed to, or relied upon by retail investors.
For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The KIID for this fund is available, alongside the prospectus via Vanguard’s website.
This document is designed for use by, and is directed only at persons resident in the UK.
The information contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.
The information contained in this document is for educational purposes only and is not a recommendation or solicitation to buy or sell investments.
Vanguard Investment Series plc has been authorised by the Central Bank of Ireland as a UCITS and has been registered for public distribution in certain EEA countries and the UK. Prospective investors are referred to the Funds' prospectus for further information. Prospective investors are also urged to consult their own professional advisers on the implications of making an investment in, and holding or disposing shares of the Funds and the receipt of distributions with respect to such shares under the law of the countries in which they are liable to taxation.
The Manager of Vanguard Investment Series plc is Vanguard Group (Ireland) Limited. Vanguard Asset Management, Limited is a distributor of Vanguard Investment Series plc.
The Manager of the Ireland domiciled funds may determine to terminate any arrangements made for marketing the shares in one or more jurisdictions in accordance with the UCITS Directive, as may be amended from time-to-time.
For investors in Ireland domiciled funds, a summary of investor rights can be obtained here and is available in English, German, French, Spanish, Dutch and Italian.
Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The Index referenced herein is used with permission. The Index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright 2016, J.P. Morgan Chase & Co. All rights reserved.