Vanguard extends fixed income reach with new model portfolios for advisors

Vanguard has broadened its suite of model portfolios for financial advisors with the introduction of two new fixed income offerings.

The Risk Diversification Tax-Aware Model and the Income Focused Models, announced Monday, are designed to help advisors address a wider range of client needs, from managing taxes to seeking higher yields, while maintaining the firm’s hallmark emphasis on low costs and broad diversification.

The Risk Diversification Tax-Aware Model is intended for clients seeking to buffer their portfolios against equity market downturns, with a particular focus on after-tax returns. This model allocates to high-quality credit and municipal bonds, and its allocations are set to adjust twice a year in response to forecasts from the Vanguard Capital Markets Model.

Meanwhile, the Income Focused Model targets investors who want to generate more income from their bond holdings. It maintains larger positions in credit, emerging markets, and below investment-grade bonds, with allocations updated quarterly based on the same capital markets outlook. According to Vanguard, this approach aims to deliver higher yields compared to the broader US fixed income market, while still offering global diversification.

“Fixed income continues to be a key component in helping investors achieve stability, generate income, and diversify their portfolios,” said Amma Boateng, managing director of financial advisor services at Vanguard. 

These launches follow a series of model portfolio rollouts from Vanguard earlier this year, including the Fixed Income Risk Diversification and Fixed Income Total Return models in April, and the Fixed Income Capital Preservation and Fixed Income Active Total Return models in July. The expanded lineup reflects a broader industry trend, as asset managers increasingly offer model portfolios to help advisors streamline investment management and focus more on client relationships.

A Morningstar report on model portfolios this year highlighted Vanguard's debut in the fixed income portfolio space, joining earlier entrants in the category such as Pimco, Fidelity, and PGIM. 

"For some advisors, building fixed-income allocations can be more complex than constructing equity portfolios, so these portfolios may gain traction," the report noted.

Separate research from Cerulli highlights advisors' slowly growing adoption of models for portolio construction, which "allows them to spend less time on investment
management and more time on growing their practices or better serving existing clients."

By the end of 2023, Cerulli found that 13% of advisor-managed assets resided in model portfolios, with 18 percent of advisors and 22% of practices overall using the vehicles.

Read more: Model portfolios on the rise among advisors

The growth in model portfolios is having an impact on ETFs, with a 2025 Cerulli survey of asset managers who provide models revealing 45.5% of model-directed assets are going into ETFs.

"It’s likely ETF allocations within model portfolios will continue to grow as more model providers consider how to incorporate active ETFs into their models, alongside the index tracking products they currently use," Cerulli said.