In times of uncertainty, it pays for income investors to be flexible, according to Vanguard’s Michael Chang. Economic data has been mixed and the path of future monetary policy is up in the air, while unresolved events continue to unfold in Washington, D.C., he said. In addition to the possibility of Federal Reserve rate cuts in September, President Donald Trump ‘s attempt to fire Fed Board of Governors member Lisa Cook has added to the unpredictability, he noted. “What I’m trying to do is really lean into strategies to generate income that I feel highly confident in, regardless of what happens in terms of the economic environment, regardless of what happens in Washington or monetary policy,” said Chang, senior portfolio manager on the Vanguard Multi-Sector Income Bond Fund , as well the Vanguard Multi-Sector Income Bond ETF . The former is rated four stars by Morningstar. A-shares, available to individual investors, have a 5.25% 30-day SEC yield and 0.45% expense ratio. The latter, launched in June, has a 30-day SEC yield of 5.45% and a 0.3% expense ratio. VGMS mountain 2025-06-09 Vanguard Multi-Sector Income Bond ETF since its June 9 inception The funds aim to gain broadly diversified exposure across the credit spectrum and hold Treasurys, corporate bonds and emerging-market securities. Being selective In this environment, Chang is shying away from large sector bets and focusing more on single name and country selections. While he is also co-head of the firm’s high-yield group, he doesn’t think investors are necessarily being paid to take risk in junk bonds right now. “While we’re positive on corporate fundamentals here in the U.S. and generally constructive on macro policy, spreads are pretty tight, probably tighter than they should be,” he said. “So we’d be tilting the portfolio a little bit more towards having a higher quality bias.” Nearly 30% of the Vanguard Multi-Sector Income Bond Fund is in BB-rated assets, the higher end of the high-yield market. It holds 23% of the portfolio in BBB bonds, which is the lower end of the investment-grade market. Those are the two largest allocations. VMSIX YTD mountain Vanguard Multi-Sector Income Bond Fund year to date Generally speaking, Chang is leaning more towards non-cyclical defensive sectors, such as health care and utilities, that should hold up even if the economy weakens. Beneath the surface Within high yield, he’s finding opportunities when looking beneath the surface. “If you drill down one or two levels, you’ll see a fair amount of dispersion in terms of how companies are doing [and] how certain sectors are doing,” he said. For his investment grade assets, he’s focused on the front end of the curve. Other areas of opportunity include bank loans, which are pretty attractive right now, he said. “[They are] higher up in capital structure, a little bit safer in general than high yield and offer pretty attractive carry with, [in] today’s environment, pretty limited opportunity cost because of where high yield is trading,” Chang explained. His emerging market focus these days is on the middle part of the asset class, since valuations are really tight — especially in the highest quality bonds, he said. “There’s a decent amount of countries that we like, where you have governments that are more reform oriented and they offer pretty attractive carry,” Chang said. For example, the fund holds government bonds issued by Mexico. This mix of assets across the spectrum gives the team flexibility at a time when it’s important to stay nimble, he said. “The ability to access a much wider opportunity set, that’s always pretty valuable,” he said. “It’s especially valuable in times like this where income is pretty hard to come by.”
Where to find income amid uncertainty, according to Vanguard fund manager
