Vanguard, the third-largest U.S. ETF sponsor, announced today it is planning to launch its first international bond ETF. The firm said it expects the Vanguard Total International Bond ETF to launch by the end of the second quarter.
Vanguard is already a dominant purveyor of bond ETFs, with 13 such funds. The issuer's bond ETF lineup includes the Vanguard Total Bond Market ETF (BND), one of the largest U.S. bond ETFs by assets, and the Vanguard Short-Term Inflation-Protected Securities ETF (VTIP). VTIP debuted in October and had nearly $154 million in assets at the end of the fourth quarter.
The Vanguard Total International Bond ETF the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged), which is comprised of about 7,000 high-quality corporate and government bonds (average credit quality AA2/AA3) from 52 countries, according to Vanguard.
The index caps its exposure to any single bond issuer, including a government, at 20% to meet regulated investment company tax-diversification requirements. The top country holdings as of December 31, 2012, were Japan (23%), France (12%), Germany (11%), and the United Kingdom (9%), according to a statement issued by Vanguard.
Pennsylvania-based Vanguard said the new ETF will have an annual expense ratio of 0.2 percent.
"Vanguard research has found that a strategic allocation to hedged international bonds substantially broadens a U.S. bond portfolio, which can further moderate risk in a diversified portfolio," Vanguard CEO Bill McNabb said in the statement.
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