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Is VFSUX a Strong Bond Fund Right Now?

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If you're looking for an Investment Grade Bond - Short fund category, then a potential option is Vanguard Short-Term Investment-Grade Administrative (VFSUX - Free Report) . VFSUX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.


VFSUX is classified in the Investment Grade Bond - Short segment by Zacks, an area full of investment potential. By investing in bonds that mature in less than two years, Investment Grade Bond - Short funds are focused on the short end of the curve. Fixed income instruments at this maturity level tend to have low duration risk, but they also pay out small yields compared to their longer-dated peers. Furthermore, these funds'focus on investment grade make them safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VFSUX. Vanguard Short-Term Investment-Grade Administrative debuted in February of 2001. Since then, VFSUX has accumulated assets of about $40.95 billion, according to the most recently available information. Samuel C. Martinez is the fund's current manager and has held that role since April of 2018.


Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 1.78%, 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 1.55%, 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 6.31%, the standard deviation of VFSUX over the past three years is 1.27%. Looking at the past 5 years, the fund's standard deviation is 1.23% compared to the category average of 6.22%. 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, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For investors who think interest rates will rise, this is an important factor to consider. VFSUX has a modified duration of 2.6, which suggests that the fund will decline 2.6% for every hundred-basis-point increase in interest rates.


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 calculates the fund's average payout in a given year. For example, this fund's average coupon of 2.3% means that a $10,000 investment should result in a yearly payout of $230.

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. VFSUX carries a beta of 0.42, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.61, which measures performance on a risk-adjusted basis.


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, VFSUX has 42.7% in high quality bonds rated at least 'AA' or higher, while 52.8% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.


As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VFSUX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 0.77%. VFSUX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $50,000; each subsequent investment needs to be at least $1.

Bottom Line

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

For additional information on the Investment Grade Bond - Short area of the mutual fund world, make sure to check out There, you can see more about the ranking process, and dive even deeper into VFSUX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out for more information on our screening capabilities, Rank, and all our articles as well.

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