Is VWESX a Strong Bond Fund Right Now?

Any investors hoping to find an Investment Grade Bond - Long fund could think about starting with Vanguard Long-Term Investment-Grade Income Investor (VWESX). VWESX holds a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VWESX is classified in the Investment Grade Bond - Long segment by Zacks, an area full of possibilities. Investment Grade Bond - Long funds focus on the long end of the curve, typically by investing in bonds that mature in more than 10 years. While fixed income instruments at this maturity level usually have high duration risk, they compensate investors with a larger yield than their short-maturity counterparts. These funds tend to be safer due to their focus on investment grade, but yields will be smaller than funds in the junk bond category.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VWESX. Since Vanguard Long-Term Investment-Grade Income Investor made its debut in July of 1973, VWESX has garnered more than $5.05 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. VWESX has a 5-year annualized total return of 9.22% and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 9.27%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. VWESX's standard deviation over the past three years is 9.84% compared to the category average of 11.3%. Over the past 5 years, the standard deviation of the fund is 8.66% compared to the category average of 10.08%. This makes the fund less volatile than its peers over the past half-decade.

VWESX carries a beta of 2.71, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.11, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, VWESX has 34.03% in high quality bonds rated at least 'AA' or higher, while 64.49% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VWESX is a no load fund. It has an expense ratio of 0.22% compared to the category average of 0.83%. So, VWESX is actually cheaper than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard Long-Term Investment-Grade Income Investor ( VWESX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard Long-Term Investment-Grade Income Investor ( VWESX ) looks like a somewhat average choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Investment Grade Bond - Long, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.