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Active fixed income and our ownership structure

For more than 40 years, Vanguard Fixed Income Group has distinguished itself as a premier fixed income manager and prudent steward of our investors’ capital. The group’s deep investment expertise, disciplined security selection processes, and rigorous risk management techniques have resulted in consistent, strong long-term performance across Vanguard’s fixed income offerings. 

It all starts with our structure

Vanguard’s long-term success in active fixed income starts with Vanguard’s unique ownership structure. Vanguard is owned by its member funds, which in turn are owned by fund shareholders. With no outside owners to satisfy, this structure ensures business and portfolio management decision focuses squarely on meeting the investment needs of our investors. 

“As investors’ needs continue to evolve, Vanguard’s structure and relentless focus on investor outcomes enable us to bring top-tier fixed income offerings to bear,” said Sara Devereux, Global Head of Vanguard Fixed Income Group. “We have no outside shareholders, so we don’t have to cut corners or fall victim to short-termism. We have the freedom to focus on the long term—from building and managing enduring fixed income solutions and investing in cutting-edge technology to developing the next generation of fixed income talent.” 

Better investments by design 

Vanguard keeps clients at the center of product design and follows a deliberate product development process with our investors’ best interests as our North Star. Every new fund proposal is diligently vetted and must meet strict criteria. For us to launch a new investment solution, it must:

• Have enduring investment merit.

• Fill an unmet investor need.

• Have the potential to be a leading offer in its category. 

Fund management 

Vanguard takes a disciplined, risk-controlled approach to managing investor assets. We adhere to the funds’ stated objectives and do not assume undue risks with investors’ money or compromise our integrity for short-term gain. Instead, we design and manage enduring, high-quality investments that can generate superior, sustained performance.

“Our active edge in fixed income revolves around compounding alpha,” said Devereux. “We focus on a diversified set of reliable strategies that are repeatable and scalable. We don't have an overreliance on large macro bets. In addition, we have a differentiated risk framework that is strengthened by our low fees. This gives us the breathing room to take risk up and down according to the opportunity set and has ultimately resulted in the best risk-adjusted returns over time.”  

Talent is key 

Top talent is critical for the successful management our investment lineup. Vanguard’s clear mission, unique structure, strong culture, and impressive performance record have enabled us to attract leading investment professionals across fixed income disciplines. 

“Our team of more than 150 portfolio managers, traders, and research analysts specialize in all publicly traded fixed income sectors,” Devereux noted. “Our process thrives on close collaboration and draws upon the team’s depth of expertise across bond markets to deploy a diversified set of strategies that we believe offers our clients a better chance of investment success.”

Track record of strong active fixed income performance 

The convergence of top talent, client-centric product development, disciplined fund management, and rigorous risk management techniques— all aided by Vanguard’s ownership structure and low fees2—has resulted in tangible long-term outperformance. Among Vanguard’s actively managed fixed income funds, 95% have outperformed their peer-group averages over the past 10 years.

“Bolstered by Vanguard’s ownership structure, the collective strength of our investment expertise, talent and capabilities is greater than the sum of its parts,” said Devereux. “By focusing on our investors’ best interests, Vanguard Fixed Income Group has been able to drive value and deliver consistent, long-term performance.”

 

Notes:

All investing is subject to risk, including the possible loss of the money you invest. 

Vanguard is owned by its funds, which are owned by Vanguard’s fund shareholder clients. 

Diversification does not ensure a profit or protect against a loss.

 

[1] For the 10-year period ended December 31, 2023, 42 of 44 Vanguard active bond funds outperformed their peer-group averages; results will vary for other time periods. Only funds with a minimum 10-year history were included in the comparisons. (Source: Lipper, a Thomson Reuters Company.) Note that this competitive performance data represents past performance, which is not a guarantee of future results, and that all investments are subject to risks.

[2] Vanguard calculations, based on data from Morningstar, Inc., as of December 31, 2022, show that Vanguard active fixed income funds had an average asset-weighted expense ratio of 11 basis points, compared with an average asset-weighted expense ratio of 55 basis points for non- Vanguard active fixed income funds. (A basis point is one-hundredth of a percentage point.)

 

Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments. High-yield bonds generally have medium- and lower-range credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings. Bonds of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

Data provided by Morningstar is property of Morningstar and Morningstar’s data providers and it should therefore not be copied or distributed. Morningstar and its data providers are not responsible for any certification or representation with respect to data validity, certainty, or accuracy and are therefore not responsible for any losses derived from the use of such information.

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