(VMBS) Mortgage-Backed Securities - NASDAQ

The Vanguard Mortgage-Backed Securities Index Fund ETF (VMBS) is a passively managed exchange-traded fund that seeks to track the performance of the Bloomberg U.S. MBS Float Adjusted Index. The fund invests in U.S. agency mortgage-backed pass-through securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC), which are government-affiliated and government-sponsored entities that guarantee or securitize pools of residential home loans. To qualify for index inclusion, underlying mortgage pool aggregates must have at least $1 billion currently outstanding and a weighted average maturity of at least one year. Rather than holding every security in the index, the fund uses a sampling strategy to replicate index returns, with at least 80% of its assets invested in bonds represented in the benchmark.

As an ETF categorized as a Government Mortgage-Backed Bond fund, VMBS provides investors with diversified exposure to the U.S. residential mortgage market through a low-cost index-based structure. Mortgage-backed securities function by aggregating individual home loans into pools, which are then packaged into tradable bonds with cash flows passed through to investors from the underlying mortgage payments of homeowners.