There’s good news and bad news. The good news is that Vanguard has filed a registration statement with the SEC for seven new bond index mutual funds.
The bad news is that unless you use a financial advisor, or have access through an employer sponsored retirement plan, you will not have access to the funds. Vanguard filed for Signal Shares and Institutional Shares, but excluded the Investor Shares which are available to the retail public. The Signal and Institutional Shares are only available to certain investors (e.g., financial advisor accounts, retirement plans, corporations, etc.) and have minimum investments of $5 million and $1 million respectively.
In the press release, Bill McNabb, Vanguard president and CEO says, “Vanguard has a quarter-century of experience in bond index management, and expanding our range of funds is a logical extension of our capabilities. Financial advisors and institutions want to construct broadly diversified fixed income portfolios, while retaining the ability to emphasize particular sectors or durations. Working in concert, our broad-based bond index funds and these new, more targeted funds can help to achieve this goal.”
What about retail investors? They will need to settle with the ETF shares that will be offered by Vanguard. So, is Vanguard making a statement about mutual funds versus ETFs when it comes to bond investing for retail investors? Vanguard’s move to offer the bond funds via ETFs rather than mutual funds (to the retail public) is an interesting development in the world of bond fund investing. I will be posting a follow up when I hear back from Vanguard.