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If investors are looking at the Muni - Bonds fund category, Vanguard High-Yield Tax-Exempt Administrative (VWALX - Free Report) could be a potential option. VWALX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify VWALX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.
History of Fund/Manager
Vanguard Group is responsible for VWALX, and the company is based out of Malvern, PA. Vanguard High-Yield Tax-Exempt Administrative made its debut in November of 2001, and since then, VWALX has accumulated about $10.93 billion in assets, per the most up-to-date date available. Mathew M. Kiselak is the fund's current manager and has held that role since July of 2010.
Performance
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 4%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.16%, 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. The standard deviation of VWALX over the past three years is 3.75% compared to the category average of 5.87%. The fund's standard deviation over the past 5 years is 4.19% compared to the category average of 6.06%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For those that believe interest rates will rise, this is an important factor to consider. VWALX has a modified duration of 6.98, which suggests that the fund will decline 6.98% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.09% means that a $10,000 investment should result in a yearly payout of $509.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. VWALX carries a beta of 1.11, 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 0.64, 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, VWALX has 21.35% in high quality bonds rated at least 'AA' or higher, while 61.44% 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, VWALX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 0.87%. Looking at the fund from a cost perspective, VWALX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $50,000 and that each subsequent investment needs to be at $1.
Bottom Line
Overall, Vanguard High-Yield Tax-Exempt Administrative has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard High-Yield Tax-Exempt Administrative looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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Is VWALX a Strong Bond Fund Right Now?
If investors are looking at the Muni - Bonds fund category, Vanguard High-Yield Tax-Exempt Administrative (VWALX - Free Report) could be a potential option. VWALX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify VWALX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.
History of Fund/Manager
Vanguard Group is responsible for VWALX, and the company is based out of Malvern, PA. Vanguard High-Yield Tax-Exempt Administrative made its debut in November of 2001, and since then, VWALX has accumulated about $10.93 billion in assets, per the most up-to-date date available. Mathew M. Kiselak is the fund's current manager and has held that role since July of 2010.
Performance
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 4%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.16%, 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. The standard deviation of VWALX over the past three years is 3.75% compared to the category average of 5.87%. The fund's standard deviation over the past 5 years is 4.19% compared to the category average of 6.06%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For those that believe interest rates will rise, this is an important factor to consider. VWALX has a modified duration of 6.98, which suggests that the fund will decline 6.98% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.09% means that a $10,000 investment should result in a yearly payout of $509.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. VWALX carries a beta of 1.11, 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 0.64, 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, VWALX has 21.35% in high quality bonds rated at least 'AA' or higher, while 61.44% 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, VWALX is a no load fund. It has an expense ratio of 0.09% compared to the category average of 0.87%. Looking at the fund from a cost perspective, VWALX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $50,000 and that each subsequent investment needs to be at $1.
Bottom Line
Overall, Vanguard High-Yield Tax-Exempt Administrative has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard High-Yield Tax-Exempt Administrative looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.