Vanguard International Fixed Interest Fund
Vanguard's International Fixed Interest (Hegded) fund is an exchange traded fund that aims to match returns to the Barclay's Global Treasury Index hedged in Australian dollars. The ETF was established in December last year and is the first global bond ETF to be covered by Lonsec, receiving an initial "highly recommended (index)" rating. This reflects Lonsec's conviction in the manager's ability to track the underlying index, before fees, on a consistent basis.
The benefit of ETFs is that they trade like stocks, providing a convenient way for investors to achieve diversification or exposure to a particular sector, while offering lower management fees than equivalent unlisted fund products. Vanguard's ETF is an additional share class of its underlying International Fixed Interest Index Fund (Hedged), which has enough scale to achieve broad international treasuries market diversification from a mix of developed and emerging countries.
Non-$A currency exposures are fully hedged in the fund through the use of currency derivatives, with the aim of largely neutralising currency risk, meaning interest rate and sovereign risks are the main risks faced by fund investors.Vanguard constructs an optimised portfolio that closely reflects the key risks of the underlying index. The approach is based on matching primary risk factors such as duration, yield curve, sector and credit quality of the portfolio with the index.
Vanguard's Asia-Pacific fixed income team is led by Stephen Howard, who has over 20 years of industry experience, and consists of nine investors split between portfolio management, trading and credit research responsibilities. The local office has continued its closer integration over recent years with the other offshore centres, particularly the US, which Lonsec views as a positive development for investors.