The same macro factors affecting the equities market, such as tariffs, geopolitical factors, and a changing interest rate policy are also affecting the fixed income markets. With that, there’s never been a better time to access active fixed income strategies that help advisors and investors navigate the murky macro environment. Vanguard has nine active ETF options that can work for any investor, depending on their specific fixed income goals.
It’s been a memorable year for active ETFs overall with a record number of new launches in 2025 while also pulling in close to $340 billion in fresh inflows. As Morningstar noted, this is more than the years of 2021 through 2023 combined. Fixed income ETFs are breaking their own records, with active funds capturing more market share as they continue to proliferate.
While Vanguard has been making low-cost, indexed funds their primary staple product for many years, investors should be reminded that their active fixed income roster is growing. The funds are backed by the Vanguard Fixed Income Group, which boasts a deep well of expertise and experience to best steer a portfolio in the right path in all market conditions.
Getting to the Core
When it comes to core exposure, an active fund that acts as an investor’s standalone fixed income allocation could be the Vanguard Core Bond ETF (VCRB). With a low 0.10% expense ratio, VCRB runs the gamut of fixed income exposure from holdings within the U.S. investment-grade bond market to other diversified fixed income allocations, such as mortgage-backed and corporate securities. Like all of Vanguard’s active fixed income funds, the fund’s portfolio managers can search the vast world of fixed income options to capture price appreciation as well as maximize yield.
Speaking of maximizing yield, investors who prefer to tilt towards income opportunities can choose the Vanguard Core-Plus Bond ETF (VPLS). The fund expands its income opportunity set to include holdings in U.S. Treasuries, mortgage-backed, and corporate securities, and emerging markets debt of varying yields, maturities, and credit qualities.
Munis have been highly sought after this year for their high yields, strong credit fundamentals, and of course, federal tax-free income. That said, a core option one must consider is the Vanguard Core Tax-Exempt Bond ETF (VCRM). VCRM includes muni debt from U.S. states and local governments or agencies whose interest is exempt from federal income taxes and the federal alternative minimum tax.
Short and Sweet
When planning for short-term cash needs to meet future expenses, consumers have a number of ways to optimize their cash such as money market accounts, Treasuries, and certificates of deposits (CDs). One option they may not have considered is short-term bonds funds that can maximize cash.
“Holding excess cash for too long carries its own risks, including missing market rallies, failing to keep pace with inflation, and, not least, falling short of asset-accumulation goals,” noted Vanguard Senior Investment Product Manager Ian O’Brien.
Given this, three options to consider that focus on the front end of the yield curve are the Vanguard Short Duration Tax-Exempt Bond ETF (VSDM), Vanguard Ultra-Short Bond ETF (VUSB), and the Vanguard Short Duration Bond ETF (VSDB).
“These ETFs are low-cost, have limited volatility, are highly liquid, and often offer more attractive yields than historically popular cash instruments, such as bank accounts, CDs, and money market funds,” O’Brien noted.
Sector Diversification and Government Securities
Fixed income investors relying heavily on safe haven Treasuries will want to diversify their exposure, especially with the Fed in a rate-cutting cycle. This makes the Vanguard Multi-Sector Income Bond ETF (VGMS) an ideal choice. VGMS adds exposure to corporate bonds, international bonds, or other fixed income assets with the objective of maximizing yield opportunities. Once again, active management allows portfolio managers to not only identify these opportunities, but to respond to changing market conditions when necessary.
Those who want stay within the safer confines of U.S. government debt, but still want diversification, can look to the Vanguard Government Securities Active ETF (VGVT). While the fund primarily focuses on Treasuries, it will also invest in other agency-backed securitized products. As of September 30, its current portfolio composition has 58.7% Treasuries, while 25.11% goes to commercial mortgage-backed securities and 16% in government mortgage-backed securities.
Reaching for Higher Yields
The newest addition to the fixed income roster couldn’t come at a more opportune time. As mentioned, with the Fed engaged in monetary easing mode, fixed income investors may be wondering where to get the higher yields they’ve been accustomed to the last few years. One area they may not have considered is high yield munis.
With that, the newest addition to the active roster is the Vanguard High-Yield Active ETF (VGHY), which is Vanguard’s first high yield active ETF offering to provide investors with maximum income extraction. With its cost-effective 0.22% expense ratio, the Vanguard Fixed Income Group can adjust the holdings of the fund whether the Fed is cutting, raising, or keeping rates steady.
Click here to learn more about Vanguard’s active fixed income ETF offerings.
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