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Betterment decided to hold a wider variety of bonds and to decrease international exposure. They didn't really say why though.

Old Bonds:

LQD: iShares iBoxx $ Investment Grade Corporate Bond ETF

expense ratio: 0.15%

VCIT: Vanguard Intermediate-Term Corporate Bond ETF

expense ratio: 0.07%

New Bonds:

AGG Bloomberg Barclays US Aggregate Bond Index

expense ratio: 0.05%

If the bonds in the US Corporate Bond ETFs are held in the U.S. High Quality Bond Funds, why did you invest in them in the first place? Which particular ETFs are we talking about?

What is the difference in the expected cost of owning only the U.S. High Quality Bond Funds? How did you calculate that cost? What distinguishes the highly quality bonds from the US corporate bonds?

What is the source of your update global market capitalization data? How did that capitalization change? How did your portfolio optimization method change? Why did the portfolio optimization method change?

How are you calculating the long term expected performance of the portfolio? How much confidence do you have in that calculation and why?

** Betterment Response **
Based on the improved portfolio optimization method, LQD which was in use for Bond exposure is being removed because those bonds are included in our existing US High Quality Bond Funds. You will likely see AGG as a replacement.

The fund fee for AGG is 0.06% where as LQD is 0.15%. The costs can be found at each providers prospectus page linked above. LQD only provided exposure to corporate bonds where as AGG is combination of Federal and more stable corporate bonds, you can read more about the portfolio of each in their prospectus.

The new portfolio optimization method is available for review here. The sources of research are proprietary to the Advice and Investment team, the changes necessitate an increase in US stock exposure and a reduction in international developed markets. The method changed to reflect the reality of today to ensure the portfolios remain optimized.

Learn about the calculation used in optimizing the portfolio by reviewing this post.

If one of your accounts were deemed eligible for the transition, this is because we determined that the expected incremental returns from the new portfolio were greater than the estimated additional tax impact. Simply put, this transition is in your best interest, based on the in-depth account analysis we performed on all customer accounts.

Please let us know if you require further assistance.