Vanguard has launched its first dynamic asset allocation fixed income model portfolios.
The portfolios, the Vanguard Fixed Income Risk Diversification and Vanguard Fixed Income Total Return, went live today and join the firm’s existing lineup of model portfolios.
“We’re excited to expand our model portfolio lineup with the launch of our first dynamic asset allocation fixed income models and leverage Vanguard’s investment and portfolio management expertise to support financial advisors in managing core fixed income assets for their clients.” Brent Beardsley, head of advisor solutions for Vanguard, said in a statement.
The model portfolios include a mix of time horizons and risk profiles. The two portfolios “seek to outperform a market-capitalization-weighted benchmark—the Bloomberg U.S. Aggregate Index and Bloomberg U.S. Universal Index respectively—and allocations are recalibrated throughout the year to align with the Vanguard Capital Markets Model (VCMM) 10-year forecasts.”
The move is in line with broader industry trends of advisors gravitating to model portfolios. A Cerulli report in November, for example, found 61% of surveyed advisors expect to give preference to model portfolios over funds of funds.
Vanguard’s investment strategy group oversees the asset allocations for the models and Vanguard’s fixed income group manages the funds included in each portfolio.
The Vanguard Fixed Income Risk Diversification model portfolio features a weighted average expense ratio of 0.05% and includes an “exposure to global investment grade bonds intended to provide ballast against equity market volatility.”
The Vanguard Fixed Income Total Return model portfolio is designed wealth accumulation and risk diversification and contains exposure to global investment grade and high yield bonds at a weighted average expense ratio of 0.08%.
Vanguard’s Fixed Income Group manages $2.6 trillion in assets under management.
The move comes a week after the firm announced a partnership with Blackstone Group and Wellington Management to develop multiasset portfolios with a mix of private and public assets.
In addition, in January, Vanguard announced reductions to the expense ratios for about 43% of its U.S.-based mutual fund and ETF share classes.