Vanguard plans to launch a new international bond index fund for its Target Retirement series and LifeStrategy Funds. It filed a registration statement with regulators Thursday and hopes to launch the Vanguard Total International Bond II Index Fund in early 2020.
The fund giant says its new bond fund will receive future cash flows from the Vanguard Target Retirement series and LifeStrategy Funds. Also, current funds of funds’ holdings in the existing Vanguard Total International Bond Index Fund will be moved into the new fund “in a prudent and tax-sensitive manner over time.”
“As our Target Retirement series and LifeStrategy Funds have grown, they have become increasingly large shareholders of their underlying index funds,” Chief Investment Officer Greg Davis said in a statement.
Vanguard’s Target Retirement series, rolled out in 2003, now has over $800 billion in assets.
“We believe it is in the best interest of shareholders to segregate the transaction costs produced by these funds of funds from the costs generated by other investors in the Total International Bond Index Fund,” Davis explained.
About 29% of assets in the Vanguard Total International Bond Index Fund come from target date funds tracked by Morningstar, according to Alec Lucas, Ph.D., a senior analyst of manager research with the fund research firm.