Few firms have done more to shape modern investing than Vanguard. For decades, the company has been synonymous with low-cost index investing, helping popularize passive strategies that transformed how millions of investors build portfolios. Its founder, John Bogle, championed the idea that keeping costs low and tracking broad market indexes would outperform many higher-cost active managers over the long run. That philosophy remains central to Vanguard’s identity.
However even the passive pioneer has given in to the active ETF movement.
Rather than abandoning its passive roots, Vanguard has expanded its actively managed ETF lineup with a particular focus on bond strategies in recent quarters, with more on the way. For investors, this growing commitment to active fixed-income sends an important message: even the world’s largest champion of passive investing believes bonds deserve a different approach.
Vanguard Continues To Build Its Active fixed-income Lineup
Today’s ETF marketplace, once dominated by passive index funds, now includes sophisticated strategies covering virtually every asset class, sector, and investment style. Active ETFs have been a primary driver of that evolution, as investors embrace professional portfolio management, tax efficiency, transparency, and intraday liquidity.
As a result, active ETFs have consistently claimed a growing share of total ETF inflows, prompting the world’s largest asset managers to expand their product offerings. Despite being a major passive player, Vanguard has been right in the thick of this expansion.
Today, the firm offers more than 17 active ETFs and ended 2025 with just over $16 billion in active ETF assets under management.
Most of these funds—as well as planned launches—focus on fixed-income. This includes the recently launched Vanguard High-Yield Active ETF (VGHY) and the upcoming Targeted Maturity Bond ETF, or BondBuilder, suite, which will add 10 new funds to its active fixed-income ETF count.
Altogether, the firm covers several key bond categories, including core bonds, ultra-short duration strategies, multisector fixed-income, short-term corporate bonds, Treasury strategies, and actively managed municipal bond portfolios.
Bonds Are Different
Why has the innovator in passive fund management taken a shine to active bond investing? The short answer is market inefficiencies.
The bond market, however, looks very different.
The core argument for passive stock investing—and the reason Bogle first proposed the index fund—is that public equity markets are highly transparent. Thousands of analysts follow major companies, new information spreads almost instantly, and stock prices quickly reflect it, making it difficult for professional managers to consistently beat broad market indexes. With that, owning the whole market makes sense.
Millions of individual securities trade across governments, corporations, municipalities, mortgage-backed securities, asset-backed securities, agency debt, preferred securities, and international issuers, and many bonds and fixed-income subsectors trade infrequently.
This fragmentation creates meaningful inefficiencies. Unlike equities, where information is quickly reflected in prices, fixed-income markets offer experienced managers greater opportunities to identify undervalued securities and exploit pricing discrepancies—characteristics that naturally favor active management.
Moreover, major bond market benchmarks carry significant limitations, favoring larger debtors, omitting key fixed-income subsectors and types, and concentrating only on the most liquid bonds.
Passive investors simply accept these allocations, while active managers are free to allocate differently. The data bears this out: State Street found that active bond managers beat their benchmarks more consistently than active stock pickers. Over the last decade, an average of 55% of active intermediate core and core-plus fixed-income managers outperformed their benchmark, compared to just 35% of stock pickers—a finding echoed by other researchers.
For Vanguard, the case for going active in bonds is clear: passive simply isn’t the best choice.
The Future Looks Bright for Active fixed-income
When the firm most closely associated with passive investing devotes increasing resources to active fixed-income, it reflects more than product development—it reflects changing market realities. Asset managers continue launching new strategies covering every segment of the bond market, and Vanguard’s continued expansion reinforces this trend.
Active managers may be better positioned to meet investor goals by adjusting portfolios as market conditions evolve, rather than accepting benchmark construction. For many portfolios, active fixed-income is the stronger choice.
To that end, investors may want to consider going active in their bond portfolios.
Vanguard Active ETFs
These ETFs are selected based on Vanguard’s active management expertise and sorted by YTD total return, which ranges between -2.5% and 1%. Expense ratios range from 0.10% to 0.18%, AUM falls between $48M and $4.1B, and current yields range from 1.1% to 5.2%.
| Ticker | Name | AUM | YTD Total Ret (%) | Yield (%) | Exp Ratio | Security Type | Actively Managed? |
|---|---|---|---|---|---|---|---|
| VFMO | Vanguard U.S. Momentum Factor ETF | $319M | 1% | 1.1% | 0.13% | ETF | Yes |
| VFMV | Vanguard U.S. Minimum Volatility ETF | $89M | 1% | 2.4% | 0.13% | ETF | Yes |
| VCRM | Vanguard Core Tax-Exempt Bond ETF | $80.8M | 0.9% | 2.9% | 0.12% | ETF | Yes |
| VSDM | Vanguard Short Duration Tax-Exempt Bond ETF | $48.2M | 0.9% | 3.1% | 0.12% | ETF | Yes |
| VUSB | Vanguard Ultra-Short Bond ETF | $4.09B | 0.2% | 5.2% | 0.10% | ETF | Yes |
| VFQY | Vanguard U.S. Quality Factor ETF | $224M | -0.1% | 1.6% | 0.13% | ETF | Yes |
| VFMF | Vanguard U.S. Multifactor ETF | $168M | -0.4% | 1.9% | 0.18% | ETF | Yes |
| VCRB | Vanguard Core Bond ETF | $63M | -1.2% | 4.2% | 0.10% | ETF | Yes |
| VFVA | Vanguard U.S. Value Factor ETF | $589M | -2.5% | 2.7% | 0.13% | ETF | Yes |
| VPLS | Vanguard Core Plus Bond ETF | $138M | 3.3% | 4.6% | 0.2% | ETF | Yes |
Vanguard’s growing commitment to active fixed-income ETFs marks an important milestone for the investment industry. The firm that helped popularize passive investing is acknowledging that bond markets differ fundamentally from equity markets and that active management can meaningfully improve investor outcomes.
The limitations of broad bond indexes, the fragmented nature of fixed-income markets, and the opportunities for security selection, duration management, and sector allocation all create conditions where skilled managers may generate additional yield and alpha over time.
Bottom Line
Combined with the low costs, transparency, and liquidity of the ETF structure, active fixed-income has become one of the most compelling areas of modern investing. Passive kingpin Vanguard’s expanding lineup of active bond ETFs suggests that the future of fixed-income may not be a purely passive decision—and that an active choice could be best.
