If inflation is on the comeback, Vanguard is one of the few fund companies now offering a solution. Today it began the subscription period for its new Vanguard Inflation-Protected Securities Fund.

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The period ends on June 29. The fund will invest primarily in inflation-indexed bonds issued by the US Treasury, US government agencies, and corporations.

PIMCO and American Century also offer high-profile TIPS-based funds.

Inflation-indexed securities differ from non-indexed fixed income investments by adjusting payments of principal and interest as the rate of inflation changes. The highest profile of these investments are Treasury Inflation-Indexed Securities (TIPS) which are issued by the Federal government and based on changes to the Consumer Price Index for Urban Consumers.

The fund is best suited to investors in tax-advantaged accounts, according to the fund company, since the inflation adjustments are made as distributions. This means that the fund will have to make income distributions to shareholders. Indeed, these distributions tend to rise during inflationary periods, which is the very time that they are of most value to investors.

The fund-launch may also be auspiciously timed. The current inflation expectation built into TIPS is just 2% (the 6.12% yield of a 10-year Treasury minus the 4.12% yield of the 10-year TIPS). Current inflation is 3.0% for the past 12 months. The fund is expected to maintain an expense ratio of 0.25%.

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In addition, the firm announced the start of a subscription period, also concluding June 29, for its new Vanguard US Value Fund, advised by Grantham, Mayo, Van Otterloo & Co. (GMO), which also manages a portion of Vanguard Explorer Fund, a $3.8 billion small-company growth fund.

This new offering, added to the nearly $135 billion that Vanguard has in actively managed funds, will be overseen by Christopher Darnell, GMO's chief investment officer of quantitative investment products, and Robert Soucy, managing director. The expense ratio of the no-load fund is expected to be 0.53%. 

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