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If you have been looking for High Yield - Bonds funds, it would not be wise to start your search with Vanguard High-Yield Corporate Administrative (VWEAX - Free Report) . VWEAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
VWEAX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as " junk " bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.
History of Fund/Manager
VWEAX finds itself in the Vanguard Group family, based out of Malvern, PA. Since Vanguard High-Yield Corporate Administrative made its debut in November of 2001, VWEAX has garnered more than $19.88 billion in assets. The fund's current manager, Michael L. Hong, has been in charge of the fund since February of 2008.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 4.92%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.83%, 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. Compared to the category average of 6.68%, the standard deviation of VWEAX over the past three years is 4.19%. Looking at the past 5 years, the fund's standard deviation is 4.05% compared to the category average of 6.5%. 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.
If you believe interest rates will rise, this is an important factor to look at. VWEAX has a modified duration of 4.5, which suggests that the fund will decline 4.5% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 5.7% means that a $10,000 investment should result in a yearly payout of $570.
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.
Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. This fund has a beta of 0.47, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, VWEAX has a positive alpha of 3.58, which measures performance on a risk-adjusted basis.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VWEAX is a no load fund. It has an expense ratio of 0.13% compared to the category average of 1.03%. From a cost perspective, VWEAX 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 Corporate Administrative has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard High-Yield Corporate Administrative looks like a somewhat weak choice for investors right now.
Don't stop here for your research on High Yield - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VWEAX to its peers as well 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 VWEAX a Strong Bond Fund Right Now?
If you have been looking for High Yield - Bonds funds, it would not be wise to start your search with Vanguard High-Yield Corporate Administrative (VWEAX - Free Report) . VWEAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
VWEAX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as " junk " bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.
History of Fund/Manager
VWEAX finds itself in the Vanguard Group family, based out of Malvern, PA. Since Vanguard High-Yield Corporate Administrative made its debut in November of 2001, VWEAX has garnered more than $19.88 billion in assets. The fund's current manager, Michael L. Hong, has been in charge of the fund since February of 2008.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 4.92%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.83%, 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. Compared to the category average of 6.68%, the standard deviation of VWEAX over the past three years is 4.19%. Looking at the past 5 years, the fund's standard deviation is 4.05% compared to the category average of 6.5%. 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.
If you believe interest rates will rise, this is an important factor to look at. VWEAX has a modified duration of 4.5, which suggests that the fund will decline 4.5% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 5.7% means that a $10,000 investment should result in a yearly payout of $570.
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.
Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. This fund has a beta of 0.47, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, VWEAX has a positive alpha of 3.58, which measures performance on a risk-adjusted basis.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VWEAX is a no load fund. It has an expense ratio of 0.13% compared to the category average of 1.03%. From a cost perspective, VWEAX 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 Corporate Administrative has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard High-Yield Corporate Administrative looks like a somewhat weak choice for investors right now.
Don't stop here for your research on High Yield - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare VWEAX to its peers as well 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.