Strategy and policy
The portfolio invests in two Vanguard bond funds and one Vanguard short-term reserves account, resulting in an allocation of 75% of assets to investment-grade U.S. bonds and 25% of assets to short-term investments. The percentages of the portfolio’s assets allocated to each underlying fund are: 50% Vanguard Total Bond Market II Index Fund, 25% Vanguard Inflation-Protected Securities Fund, and 25% Vanguard Short-Term Reserves Account.
Through its ownership of the bond funds, the portfolio indirectly holds a mix of bonds. Half the portfolio is invested indirectly in a mix of bonds—corporate, U.S. government and agency, mortgage-backed, and international dollar-denominated—that represents a wide spectrum of investment-grade, taxable fixed income securities in the United States with maturities longer than 1 year. The other half of the portfolio is split between investment-grade inflation-indexed bonds issued by the United States Treasury (and in some cases corporations) having maturities that range from 7 to 20 years, funding agreements issued by insurance companies, and high-quality, short-term money market instruments having maturities of 90 days or less.
The portfolio invests in three Vanguard funds. Each underlying fund follows its own investment policies.