The Vanguard Global Credit Bond Fund is managed by Vanguard’s Fixed Income Group with Sarang Kulkarni as lead portfolio manager. Sarang is a credit specialist portfolio manager with more than 30 years’ investment experience and has a focus on investment-grade and high-yield active strategies in European credit. As part of Vanguard’s Fixed Income Group, Sarang employs a security selection-focused strategy that leverages the expertise of Vanguard’s in-house credit research team to find undervalued securities.
"If our behavior and risk is more predictable, investors can be more confident in how to use it in their asset allocations. At the same time, we don’t compromise on performance."
Lead Portfolio Manager of the Vanguard Global Credit Bond Fund
Fundamental credit research lies at the heart of how we identify active global credit opportunities. Using a security selection-focused strategy, we identify improving or deteriorating companies and take active views on the market’s pricing of their creditworthiness. To invest in the best credit opportunities, wherever they may present themselves, our approach is based on global coverage, patience, prudence and smart risk-taking with the aim of generating consistent, risk-adjusted returns over the longer term.
As such, we seek to generate alpha from opportunities across a diversified set of issuers, sectors, security types and points on the yield curve, with the primary focus on bottom-up and relative value opportunities to construct a portfolio with a high information ratio1. We avoid taking excessive exposure to top-down, directional risk, which tends to have a low probability of success over the long term.
Our in-house global credit research team searches globally for attractive situations based on forward-looking fundamentals. The active fixed income team comprises more than 130 global team members including more than 60 credit research analysts. They meet with bond issuers to get an understanding of their strategies, strengths and potential weaknesses. The analysts can tease out ideas that are long-term in nature as well as those that are event- or valuation-driven. Our scale and global team enable us to leverage the collective expertise of sector- and country-focused analysts, portfolio managers and traders, which gives us access to opportunities traded in markets anywhere in the world.
We have a positive view on select names within the European insurance sector, particularly those which have adopted a strategy to move away from riskier business lines to more stable opportunities. This strategy can lead to a reduction in the amount of regulatory capital an insurer needs to hold and strengthen its credit profile.
Our disciplined investment process also allows us to identify names based on an improving credit trend in other sectors. For example, we recently had a positive view on a group which invests in consumer non-cyclical companies globally, partly driven by its business diversification into new areas. The valuation of these bonds was not initially consistent with the group’s profile as a stable, consumer-focused company, although the bonds did subsequently perform strongly.
Some active credit managers base their strategies around taking excessive bets on the direction of bond markets to generate returns, which is sometimes referred to as “levered beta” (taking more or less risk than the index the fund is managed against). This can involve strategies such as materially changing the duration profile of the fund or significantly shifting its allocation to riskier credit segments such as high-yield, hybrid or AT12 bonds. Relying on beta to generate returns in this way can be difficult to get right consistently, particularly in more volatile environments.
Our approach is different. We believe that investors should know what they are investing in. Our fund is transparent and true-to-label, which means that as well as having the goal of achieving consistent alpha generation over the market cycle, it has a similar risk-return and asset-class profile to the assets it represents, allowing it to stay true to the character of the fund. We deliberately avoid unintended beta. If our behaviour and risk is more predictable, investors can be more confident in how to use it in their asset allocations. At the same time, we don’t compromise on performance.
Rather than relying on concentrated or correlated risk positions to generate returns, our active fixed income teams aim to construct portfolios offering the best active returns relative to the risk incurred. This results in the fund having a high information ratio relative to its peer group, and better returns for the investors in the fund.
We aim to provide diversified, stable long-term relative returns and income using the full breadth, depth and experience of Vanguard’s in-house Fixed Income Group. We seek to access the best opportunities while preserving the risk-dampening qualities of bonds, giving investors what they expect of the asset class – a focus on high-quality, investment-grade holdings that should act as a diversifier relative to equities through varying market conditions. Managing downside risk is key, because we believe that the ability to avoid companies or sectors facing challenging times is just as important, if not more important, than identifying the winners in active global credit markets. Rather than relying on a handful of large trades to drive the performance of the fund, we diversify our sources of alpha, which allows all our active bond funds to reduce the volatility of their returns.
The scale of Vanguard’s Fixed Income Group means we can keep investing in our people, technology and systems to deliver better returns for the funds. As a large investor with a long-term approach to investing, we have good access to company management teams. As a result, our analysts can independently assess how attractive the investment opportunity is, which can give us a head start over investors who rely solely on third-party resources, such as rating agency research or sell-side reports.
Finally, our low expense ratio gives us an asymmetric advantage: when the opportunity set is attractive, we can take the same amount of risk as our peers. When the risk-reward outlook appears less attractive, we can reduce risk and take a more defensive approach. We can do this because of our low fees. Competitors may feel pressure to maintain higher risk to offset their higher fees.
1 A measure of risk-return which shows portfolio returns above the returns of a benchmark relative to the volatility of those returns.
2 AT1 is an acronym for Additional Tier 1 capital. It was introduced with Basel III after the Global Financial Crisis to replace the former term ‘Tier 1 Securities’ term. AT1 notes are a key instrument in regulators’ post-crisis bail-in regime and fulfil an important part of banks’ regulatory capital requirements.
Investment risk information
The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.
Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall.
Investments in smaller companies may be more volatile than investments in well-established blue chip companies.
Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds.
The Vanguard Global Credit Bond Fund and the Vanguard Emerging Markets Bond Fund may use derivatives, including for investment purposes, in order to reduce risk or cost and/or generate extra income or growth. For all other funds they will be used to reduce risk or cost and/or generate extra income or growth. The use of derivatives could increase or reduce exposure to underlying assets and result in greater fluctuations of the Funds net asset value. A derivative is a financial contract whose value is based on the value of a financial asset (such as a share, bond, or currency) or a market index.
Some funds invest in securities which are denominated in different currencies. Movements in currency exchange rates can affect the return of investments.
For further information on risks please see our reports and policy documents.
This is a marketing communication.
For professional investors only (as defined under the MiFID II Directive) investing for their own account (including management companies (fund of funds) and professional clients investing on behalf of their discretionary clients). In Switzerland for professional investors only. Not to be distributed to the public.
For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS and to the KIID (for UK, Channel Islands, Isle of Man investors) and to the KID (for European investors) before making any final investment decisions. The KIID and KID for this fund are available in local languages, alongside the prospectus via Vanguard Global.
The information contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information in this document is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.
For Swiss professional investors: Potential investors will not benefit from the protection of the FinSA on assessing appropriateness and suitability.
Vanguard Investment Series plc has been authorised by the Central Bank of Ireland as a UCITS and has been registered for public distribution in certain EEA countries and the UK. Prospective investors are referred to the Funds' prospectus for further information. Prospective investors are also urged to consult their own professional advisers on the implications of making an investment in, and holding or disposing shares of the Funds and the receipt of distributions with respect to such shares under the law of the countries in which they are liable to taxation.
The Manager of Vanguard Investment Series plc is Vanguard Group (Ireland) Limited. Vanguard Asset Management, Limited is a distributor of Vanguard Investment Series plc.
For Swiss professional investors: The Manager of Vanguard Investment Series plc is Vanguard Group (Ireland) Limited. Vanguard Investments Switzerland GmbH is a financial services provider, providing services in the form of purchase and sales according to Art. 3 (c)(1) FinSA . Vanguard Investments Switzerland GmbH will not perform any appropriateness or suitability assessment. Furthermore, Vanguard Investments Switzerland GmbH does not provide any services in the form of advice. Vanguard Investment Series plc has been authorised by the Central Bank of Ireland as a UCITS. Prospective investors are referred to the Funds' prospectus for further information. Prospective investors are also urged to consult their own professional advisors on the implications of making an investment in, and holding or disposing shares of the Funds and the receipt of distributions with respect to such shares under the law of the countries in which they are liable to taxation.
For Swiss professional investors: Vanguard Investment Series plc has been approved for offer in Switzerland by the Swiss Financial Market Supervisory Authority (FINMA). The information provided herein does not constitute an offer of Vanguard Investment Series plc in Switzerland pursuant to FinSA and its implementing ordinance. This is solely an advertisement pursuant to FinSA and its implementing ordinance for Vanguard Investment Series plc. The Representative and the Paying Agent in Switzerland is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich. Copies of the Articles of Incorporation, KID, Prospectus, Declaration of Trust, By-Laws, Annual Report and Semiannual Report for these funds can be obtained free of charge from the Swiss Representative or from Vanguard Investments Switzerland GmbH.
The Manager of the Ireland domiciled funds may determine to terminate any arrangements made for marketing the shares in one or more jurisdictions in accordance with the UCITS Directive, as may be amended from time-to-time.
For investors in Ireland domiciled funds, a summary of investor rights can be found in Vanguard Investment Series – Summary of Investor Rights, available in English, German, French, Spanish, Dutch and Italian.
For Dutch investors only: The fund(s) referred to in this document are listed in the AFM register as defined in section 1:107 Dutch Financial Supervision Act (Wet op het financieel toezicht). For details of the Risk indicator for each fund listed in this document, please see the fact sheet(s) which are available from Vanguard product page.
Issued in EEA by Vanguard Group (Ireland) Limited which is regulated in Ireland by the Central Bank of Ireland.
Issued in Switzerland by Vanguard Investments Switzerland GmbH.
Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.
© 2023 Vanguard Group (Ireland) Limited. All rights reserved.
© 2023 Vanguard Investments Switzerland GmbH. All rights reserved.
© 2023 Vanguard Asset Management, Limited. All rights reserved.