How Much Risk?

Vanguard’s newest bond fund, which opened for investment on Thursday, January 26^th, isn’t as new as you think.

A little over a year ago, Vanguard launched two active bond funds. Vanguard gave Core-Plus Bond (VCPIX) just two weeks to gather assets before building its portfolio while the other, Multi-Sector Income (VMSIX), was seeded by Vanguard with $25 million and managed in the shadows … until last week, when Vanguard opened the fund to all comers.

I shared my Quick Take on the fund’s “official” opening last week when the announcement was made. This week I’d like to dig a little deeper. In this analysis, I’m going to include Core-Bond (VCORX) along with Core-Plus Bond, as the three funds make a set. Let me explain.

Management and Costs

With any fund we need to get through some of the basics and answer the questions of who is making the investment decisions and at what cost.

Shareholders will find a good deal of overlap in the funds’ management teams. Arvind Narayanan and Daniel Shaykevich are listed on all three. Brian Quigley has a hand in Core and Core-Plus Bond while Michael Chang covers the high-yield bonds in Core-Plus Bond and Multi-Sector Income. Until, well, this morning (January 31), Samuel Martinez was a co-manager on Core Bond but he has moved to a new role within Vanguard. So, we're down to four managers on three funds.

Mixing and Matching Managers

Expenses are low—as you’d expect. Heck, if you can access Core Bond’s Admiral shares, you are paying just 0.10%—which is an index fund-level fee for active management. That said, Vanguard charges progressively more money to manage each fund as their complexity grows.

Increasingly Expensive