News

21st Sep

Vanguard launches active bond fund targeting UK income investors

Vanguard, the world’s second-largest asset manager, has continued to target the UK market by announcing the launch of an actively managed bond fund.

The move comes hot on the heels of its launch of a low cost investment platform which had the share price of rival online brokers tumbling.

Vanguard has since stated that it will not be joining the growing number of its competitors that are offering robo advice, rather it will concentrate on offering rock bottom prices on actively managed funds aimed at DIY investors.

Vanguard has traditionally been known for its range of low-cost passive ‘tracker’ funds and it also has a small selection of actively managed equity funds and passive bond funds in the UK; however the announcement of an actively managed fixed income fund is its first, and is one that is likely to worry the competition. 

The company plans to market its funds directly to retail investors via its Vanguard Investor platform – VanguardInvestor targets DIY investors - and undercut its rivals on the cost of its tax-efficient ISA wrapper. 

Vanguard’s move comes at a time of increasing activity in the DIY investing arena with traditional lines being blurred and competition increasing. 

When Vanguard Investor was announces, shares in long-established brokers and platforms came under pressure with Hargreaves Lansdown the UK’s biggest fund-supermarket with more than 600,000 investors, shedding 4.7% as its Vanguard platform started to look expensive. 

Vanguard is also challenging Britain’s largest fund houses such as Schroders, Aberdeen, Janus Henderson, and Jupiter Asset Management because investors will have more direct access to Vanguard’s range of cheap passive and active funds. 

With many more people turning to DIY investing having been denied access to financial advice following the government’s RetailDistribution Review the FCA has launched a review into the growing number of investment platforms to ensure that they offer investors good value. As Vanguard increasingly focuses on the UK market many predict a price war among both brokers and fund managers; it is estimated that its aggressive pricing model will attract up to 25% of net new money invested in the UK over the next three years – an annual inflow of £5bn.  

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