Vanguard Opts for Limited Addition of China's Bonds to Its Funds
- Plan is to allocate 0.2% to 0.5% to China bonds starting April
- Constraints remain for investors looking at China: Vanguard
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Mutual-fund giant Vanguard Group Inc. is opting for a limited addition of Chinese domestic bonds to its portfolios, stopping short of the inclusion plans for one of the benchmark indexes for global debt.
Vanguard, which uses Bloomberg Barclays indexes for its funds, sees diversification benefits from adding China, the company said in an emailed response to questions. Yet the challenge for bond-index trackers is to avoid incurring high transaction costs -- which would introduce divergence from index performance -- in a market with less liquidity, such as China.