Vanguard reduces FI fund fees

Vanguard has reduced the fees of its Australian Fixed Interest Index and Australian Corporate Fixed Interest Index managed funds and exchange traded funds (ETFs).

The changes, which would take effect from 1 October, had been achieved as the firm was able to achieve “efficiencies of scale” as the funds grew in assets under management, Vanguard said.

Summary of fee changes

Source: Vanguard

According to FE Analytics, within the Australian Core Strategies universe, the fixed interest diversified credit sector had an average annualised return of 4.35% over the three years to 31 August, 2021.

Including fees, the Australian Corporate Fixed Interest Index fund returned 4.4%, the Australian Fixed Interest Index ETF returned 4.33%, while the Australian Corporate Fixed Interest Index ETF and Australian Fixed Interest Index both returned 4.28%.

Total return of Vanguard fixed income funds over three years to 31 August 2020

Evan Reedman, Vanguard Australia’s head of product, said: “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.

“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.

“For advisers, having lower cost, high quality fixed interest choices available in this environment is critical to ensure they can continue to harness the critical role of bonds and effectively diversify client portfolios.”