Benefits of investing with Vanguard

Competitive long-term performance 

Vanguard's investment approach provides investors with an efficient way to capture long-term market performance.

Diversification

The Fund invests in a diversified portfolio of securities, which means the Fund is less exposed to the performance fluctuations of individual securities.

Low cost investing 

The Fund has low ongoing fees as we strive to minimise the costs of managing and operating the Fund.

Risk level

Low

Investor suitability

Investors seeking exposure to a diversified portfolio of Australian corporate fixed interest securities.

About the Fund

The ETF provides investors with low-cost, diversified exposure to Australian corporate bonds. It invests in investment grade bonds issued by corporations including Australia's four largest banks, offshore banks, other lending institutions and property trusts. The benchmark has a shorter duration than the broader composite index but a lower overall credit quality (BBB- or higher by Standard & Poor's ratings agency or equivalent) and therefore a higher expected yield.

What is an ETF?

An ETF is an Exchange Traded Fund, which is quoted for trading on the AQUA market of the ASX (in this case, it is the CDIs that are quoted for trading on the AQUA market of the ASX). Generally, these exchange traded funds comprise broadly diversified investment portfolios of either shares, bonds or real estate securities and are constructed using an indexed investment methodology.

ETFs seek to combine the best features of index managed funds and listed shares in one investment. Vanguard ETFs come with the benefits of low cost, broad diversification, transparency and tax efficiency due to low turnover of the underlying securities. However, unlike traditional index funds which are priced only once per day, ETF securities trade on a stock exchange so they can be bought and sold at any time during the trading day at prevailing market prices. ETFs carry certain risks (refer to the section 2. Risks' in the PDS for further details).

Who is Vanguard?

Vanguard Investments Australia Ltd (Vanguard) is a wholly owned subsidiary of The Vanguard Group, Inc. With more than AUD$6.9 trillion in assets under management as of 31 December 2018, including over AUD$1.2 trillion in ETFs; The Vanguard Group Inc is one of the world's largest global investment management companies. In Australia, Vanguard has been serving financial advisers, retail clients and institutional investors for more than 20 years.

How we invest your money

The Vanguard Australian Corporate Fixed Interest Index ETF seeks to track the return of the Bloomberg AusBond Credit 0+Yr Index before taking into account fees, expenses and tax.

The Bloomberg AusBond Credit 0+ Yr Index is a market value weighted index comprising securities (bonds) that are of investment grade3 quality and typically include bonds issued by corporate entities such as the four largest banks in Australia, offshore banks, other lending institutions, property trusts and other corporate issuers. The Bloomberg AusBond Credit 0+ Yr Index was not created by, and is not managed by, a related body corporate of Vanguard.

Bond indices change far more quickly than share indices because bonds have a finite life (maturity). Index eligibility criteria such as time to maturity and investment grading may cause bonds to enter or fall out of the index at month end when the index is rebalanced. Every time a security is either added to or removed from the index, its composition changes and may require Vanguard to modify the portfolio.

The Fund aims to hold an appropriate number of securities so as to produce a portfolio risk exposure profile consistent with that of the index. This is generally achieved by holding a representative sample of the securities included in the index. Security weightings in the Fund may vary from the index weightings. The Fund may exclude certain securities that are included in the index or may invest in securities that have been or are expected to be included in the index. The Fund may utilise derivatives, including over-the-counter derivatives, generally to manage the overall interest rate and credit risk exposure of the portfolio.

The use of over-the-counter derivatives will not be to a material extent - that is, use will generally not exceed 5% of the net asset value of the Fund, other than temporarily and in exceptional circumstances. Importantly, derivatives will not be used to leverage the assets of the Fund.

In accordance with the index methodology, at the time of purchase the eligible fixed income securities in the Fund must be of an investment grade credit quality, which is determined by reference to ratings published by independent credit research firms.