WSJ on Vanguard Ultra-Short
Earlier this week, The Wall Street Journal wrote, "Vanguard Challenges Bond Behemoths With Active Funds," which discussed the company's rapid growth in short-term and ultra-short bond funds. They explain, "Vanguard Group, the titan of low-cost index funds, is coming after a fast-growing pocket of the money-management industry: actively managed bond funds. The firm's investment dollars in such funds pushed past the half-trillion mark for the first time in June, a potential problem for competitors such as BlackRock Inc., Fidelity Investments, Pimco and Western Asset Management Co., which have long dominated bond investing. Malvern, Pa.-based Vanguard has made a number of hires in recent years to expand in areas like emerging markets, short-term corporate debt and pan-market, or 'core bond' funds. Most of the nascent funds are small to midsize but they are growing quickly, in large part because they charge much less than the competition." The piece continues, "About five years ago, the firm set out to change that by broadening the range of active bond funds it offers, said John Hollyer, global head of fixed income at Vanguard. It launched an ultra-short-term bond fund in 2015, and the core bond fund and an emerging markets bond fund in 2016.... The new funds are still relatively small, and Vanguard's active bond funds account for about 8% of overall assets. Still, the rate of growth picked up in 2020. Vanguard's ultrashort fund has been particularly attractive this year as a slightly riskier alternative to money-market funds, which now yield close to zero because of the Fed's rate cuts, Mr. DeMaso said. The fund, which yields about 1%, has grown to $9.3 billion from $6.7 billion at the start of the year, while Pimco's comparable fund has shrunk and Fidelity's has stayed unchanged, according to Morningstar. The lowest-cost shares in Vanguard's fund charge $1 per $1,000 invested, compared with $4.50 for Pimco and $2.50 for Fidelity." (Let us know if you'd like to see our latest Bond Fund Intelligence publication, which tracks the bond fund marketplace with an emphasis on the ultra-short segment, or Bond Fund Portfolio Holdings data set. We released our Ultra-Short Bond Fund Portfolio Holdings last week, and updated our Short-Term Bond Fund Portfolio Holdings yesterday.)
