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Vanguard launches Emerging Markets Government Bond Index Fund

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Vanguard has launched the Vanguard Emerging Markets Government Bond Index Fund, the company’s first international fixed income offering available to US investors.

 
The fund is now accepting investments during a subscription period that will extend through the end of business on 30 May 2013. During this period, the fund will invest in money market instruments as it accumulates sufficient assets to construct a representative, diversified portfolio. The fund’s ETF shares (VWOB) are scheduled to begin trading in early June.
 
Following the subscription period, the fund will seek to track the Barclays USD Emerging Markets Government RIC Capped Index. The fund will invest solely in US dollar-denominated emerging markets bonds. The benchmark includes approximately 560 government, agency, and local authority issuers. When necessary, the index will limit weightings of individual debt issuers to meet IRS investment company diversification requirements.
 
The expense ratios for the ETF, Investor, Admiral, and Institutional Shares of Vanguard Emerging Markets Government Bond Index Fund will range from 0.30 per cent to 0.50 per cent. This compares with an expense ratio of 1.21 per cent for the average emerging markets bond fund. The fund will assess a purchase fee of 0.75 per cent on all non-ETF shares to help offset the higher transaction costs associated with buying emerging markets bonds.
 
The fund is intended for investors who are willing to accept the higher risk of emerging markets bonds relative to the collective fixed income market. Vanguard suggests that only investors with well-diversified, balanced investment programmes consider the fund for a portion of their overall holdings.
 
The fund’s ETF shares join the 65 low-cost Vanguard ETFs available commission free to Vanguard clients, enabling them to create a custom portfolio, contribute to it monthly, and rebalance periodically. 

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