Vanguard reduces fees on bond-related products

Vanguard has announced reductions to the cost of a number of its Australian fixed interest funds which will see fee reductions 0.05%.

The company announced to the Australian Securities Exchange (ASX) that fees on its Australian Fixed Interest Fund and Exchange Traded Fund (ETF) would be reduced from 0.24% to 0.15% and 0.20% to 0.15% respectively while fees on the Vanguard Australian Corporate Fixed Interest Index fund would also be reduced from 0.29% to 0.24% and the ETF from 0.26% to 0.20%.

Vanguard attributed its ability to deliver the fee reductions to growth and maturity delivering efficiencies of scale.

Commenting on the move, Vanguard Australia’s Head of Product, Evan Reedman said keeping costs low on Vanguard’s broadly diversified funds was one of the many ways the company could continue to support Australian investors.

At the same time, he acknowledged that persistently low yields had prompted some investors to question the role of bonds.

The Vanguard Australian Fixed Interest and Corporate Fixed Interest funds are designed to provide investors with access to diversified, broad market access to government and corporate-issued bonds. As a result of their growth, they hold more securities compared to their peers and can track tighter against their indices.

“Persistently low yields have led some investors to question the role of bonds in a long-term financial plan, potentially overlooking the key function of bonds in a well-diversified portfolio,” Reedman said. “As a defensive asset, bonds serve to cushion an investment portfolio and can help smooth out an otherwise anxiety-inducing ride during periods of market volatility.”

“And if there is one lesson to be learnt from the last 18 months, it is that uncertainty induced volatility is here to stay,” he said.

The fee reductions will cut in from 1 October.