Global bond ETF comparison — UK 2026/27
If you want a bond sleeve in your UK portfolio, the global aggregate bond ETF is the standard wrapper. There are five real choices for UK retail, and they differ on the only feature that matters most: GBP currency hedging. Unhedged bonds turn into an FX bet against your future spending; hedged bonds do what bonds are supposed to do — cushion equity volatility. Here's how to pick.
The UK retail shortlist (2026/27)
| Ticker | Name | OCF | GBP Hedged? | Acc / Dist |
|---|---|---|---|---|
| AGGG | iShares Core Global Aggregate Bond UCITS | 0.10% | No (USD-base) | Dist (USD) |
| AGGH | iShares Core Global Aggregate Bond GBP Hedged Acc | 0.10% | Yes | Acc |
| GLAG | iShares Global Aggregate Bond UCITS | 0.10% | No (USD-base) | Acc (USD) |
| VAGP | Vanguard Global Aggregate Bond GBP Hedged Acc | 0.10% | Yes | Acc |
| VAGS | Vanguard Global Aggregate Bond GBP Hedged Dist | 0.10% | Yes | Dist |
| IGLT | iShares Core UK Gilts UCITS (UK only) | 0.07% | N/A (GBP native) | Dist |
| VGOV | Vanguard UK Gilt UCITS | 0.07% | N/A (GBP native) | Dist |
The single most important decision: GBP hedge or not
The Bloomberg Global Aggregate Bond Index, which all the AGGG-family funds track, is roughly 40% USD-denominated, 25% EUR, 15% JPY, 5% GBP, with the rest in CAD, AUD and other developed currencies. Without hedging, the bond returns you receive in GBP will be dominated by FX moves, not by interest rate changes.
Example: in 2022, US Treasury bond prices fell ~15% (rising yields). GBP fell against USD by ~12%. A UK investor in an unhedged global bond ETF would see those two largely cancel out — bond price drop offset by USD strength. In 2023, the reverse: US Treasuries flat to up, GBP up against USD, so the unhedged UK investor would see a worse return than the underlying bonds delivered.
The point: unhedged global bonds give you a 50/50 mix of bond return and currency return. For UK investors using bonds as a portfolio stabiliser, this is the wrong outcome — you want the bond return, not currency exposure.
Recommendation: for UK retail, GBP-hedged is the default. AGGH (iShares) or VAGP/VAGS (Vanguard) are the appropriate choices.
Hedging cost — the real number
Currency hedging isn't free. The fund enters into forward FX contracts to neutralise the currency exposure of its bond holdings. The cost of this hedging is the interest rate differential between GBP and the bond's underlying currency.
Currently (2026), GBP rates are similar to USD rates (BoE base rate 3.75%, Fed Funds ~4.25%). The hedging cost of a USD bond back to GBP is roughly the rate differential = ~0.50% per year drag (you're effectively paying USD's higher yield away to get GBP-equivalent return).
Versus EUR (currently lower yield than GBP): hedging EUR bonds back to GBP gives you ~1% per year POSITIVE drift (you keep the GBP yield premium). Versus JPY: similar story.
Net effect for a diversified global bond hedged to GBP: hedging cost is roughly 0–0.30% per year, varying with the global rate environment. The fund's OCF doesn't include this explicit cost; it shows up in tracking difference. Don't let this stop you hedging — the unhedged volatility cost is far higher.
Duration — the second most important spec
Duration is roughly the % drop in bond price for each 1% rise in interest rates. Global aggregate indices have effective duration around 7 years — meaning a 1% rate rise drops the bond ETF by ~7%.
For a UK retail investor's bond sleeve, 7-year duration is on the long end. Considerations:
- Higher duration = bigger price moves. AGGH dropped ~15% in 2022 when rates rose sharply.
- Higher duration = more income. The yield curve is usually upward-sloping, so longer-duration bonds yield more.
- For pure stabiliser role: shorter-duration (1–3 years) gives less volatility. Consider iShares £ Corporate Bond 0-5y (IS15) or short-duration alternatives.
- For full diversification: medium-to-long duration (5–10 years) is standard. AGGH / VAGP fit.
Credit quality
Global Aggregate indices include:
- ~55% government bonds (US Treasuries, gilts, JGBs, Bunds, etc.) — AAA / AA generally
- ~25% government-related (agency, supranational, local government) — AAA / AA
- ~20% investment-grade corporate (Apple, Microsoft, AT&T, etc.) — AAA to BBB
The index is investment-grade only — no high-yield ("junk"). This is important for the "bonds cushion equity" role: high-yield bonds correlate too much with equity to be a defensive holding.
For higher yields with more credit risk, separate high-yield bond ETFs exist (SHYU, IHYG) but they shouldn't be the core bond allocation.
Vanguard VAGP vs iShares AGGH
Both track effectively the same index. Both 0.10% OCF. Both GBP-hedged accumulating. Differences:
- VAGP: Vanguard. Slightly larger fund (faster trading). Available on Vanguard platform.
- AGGH: iShares (BlackRock). Available on most non-Vanguard platforms. Slightly tighter tracking historically.
- Securities lending pass-through: Vanguard ~100%, iShares ~62.5% — advantage Vanguard, but on bond ETFs the absolute lending revenue is smaller, so the practical impact is tiny.
For most UK retail, pick whichever is available on your platform. If both, slight edge to VAGP on cost-pass-through; otherwise AGGH is fine.
Alternatives to global aggregate
UK gilts only (IGLT / VGOV)
If you want pure GBP exposure with no FX hedging dimension at all, hold UK gilts directly. IGLT (0.07% OCF) or VGOV (0.07% OCF) both track the FTSE UK Gilt Index. ~12 years duration on average (somewhat longer than global agg). Pure GBP — zero hedging cost or risk.
Trade-off: less diversification. UK gilts move with UK rates, period. Global aggregate gives you exposure to US Treasuries, German bunds, Japanese government bonds, etc., which add diversification.
Inflation-linked gilts (INXG)
iShares £ Index-Linked Gilts UCITS (INXG, 0.10% OCF) holds UK linkers. The coupons and principal are uplifted by UK RPI. Useful if inflation hedge is your main goal. NOT a substitute for nominal gilts — linkers can underperform when real yields rise. We cover this separately on the inflation-linked gilt comparison page.
US Treasuries only (IBTL / IDTM)
For pure US government bond exposure (e.g. if you specifically want US duration exposure rather than global), IBTL (iShares $ Treasury Bond 1-3yr UCITS) or longer-dated alternatives exist. Unhedged GBP investors get full USD currency exposure. Hedged share classes (e.g. IBGH for short-dated) reduce this.
Decision framework
For most UK retail with a balanced portfolio
→ AGGH (or VAGP if on Vanguard platform). Global aggregate, GBP-hedged, 0.10% OCF, ~7-year duration. Standard, defensible.
If you want less rate volatility
→ Mix AGGH with a shorter-duration fund (e.g. IBGH iShares $ Treasury 1-3yr Hedged GBP Acc, or IS15 Sterling Corporate Bond 0-5y). Or hold cash/MMFs for the most defensive sleeve.
If you only want UK exposure
→ IGLT or VGOV. Pure UK gilts, no FX. Less diversified than global agg but simpler.
If inflation is your primary concern
→ INXG. UK linkers track RPI directly. See our linker ETF vs direct gilt ladder comparison for the full mechanic.
How much bond allocation should you have?
The standard frameworks:
- "Age in bonds": 30 years old = 30% bonds, 70% equity. Conservative, doesn't account for individual risk tolerance.
- "110 minus age in equity": 30 years old = 80% equity, 20% bonds. More aggressive.
- "Bonds = what helps you sleep at night": behavioural. If a 50% equity drawdown would cause you to sell at the bottom, you have too much equity.
- Pure mathematical optimal: depends on time horizon, return expectations, risk tolerance. For 30+ year horizons, 0–20% bonds is often optimal from a return-maximisation view; the bonds are insurance, not return enhancement.
Frequently asked questions
Why don't bond ETFs have a "yield to maturity" like buying a gilt directly?
They do — published on the factsheet. But the YTM of an ETF holding many bonds with different maturities is an average; individual bonds in the fund will mature and be replaced with new bonds at then-current yields. The fund doesn't hold to maturity; it rebalances. So the YTM is a rough guide, not a guaranteed return.
Should I worry about the 2022 bond crash repeating?
2022 was unusual — rates rose sharply from zero. Most periods see smaller rate moves and smaller bond price changes. Bonds' role in a balanced portfolio is to provide ballast over the long run; expect occasional 5-15% drawdowns and longer-term recovery via reinvested coupons at higher yields.
Is AGGH suitable for an ISA / SIPP?
Yes. All these ETFs are UCITS and ISA/SIPP-eligible on standard UK retail platforms.
What's the difference between Bloomberg Global Aggregate and Bloomberg Global Aggregate Treasury?
The Aggregate includes government, government-related and investment-grade corporate (mixed bag). The Aggregate Treasury is government bonds only (more conservative). For the standard "bond cushion" role, the broader Aggregate is fine. For a more defensive sleeve, Treasury-only versions are available (IGTM, etc.).
Why do some bond ETFs pay monthly, others quarterly?
The fund chooses its distribution frequency. Bond income is received continuously (every bond has its own coupon schedule) but funds usually aggregate distributions monthly or quarterly. For Acc share classes, the income is reinvested continuously inside the fund regardless.
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