Several of Vanguard’s index funds will be switching to Barclays Capital’s float-adjusted bond indexes from the Barclays indexes that currently serve as the funds’ target benchmarks. According to Vanguard, the new benchmarks better represent actual liquidity in the marketplace and should help insulate Vanguard’s bond index funds from securities whose prices may be distorted by significant reduction in supply as a result of Federal Reserve buybacks.
The term “float” refers to the amount of a given security available for public trading; it excludes amounts such as those held by company insiders, affiliates, or governments. “We believe that float-adjusted indexes more accurately represent an investor’s opportunities in a particular market,” said Gus Sauter, Vanguard’s chief investment officer, in a release announcing the shift. “Whenever possible, Vanguard’s index funds will seek to track benchmarks that follow this best practice.”
The company indicated that no significant change in the funds’ risk attributes, including duration, is expected once the new benchmarks are adopted, which is scheduled for some time in the fourth quarter of this year.
The migration to the new indexes will affect the following portfolios:
? Vanguard Total Bond Market Index Fund (VITBX)
? Vanguard Short-Term Bond Index Fund (VBISX)
? Vanguard Intermediate-Term Bond Index Fund (VBIIX)