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Is VWESX a Strong Bond Fund Right Now?

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Investment Grade Bond - Long fund seekers may want to consider taking a look at Vanguard Long-Term Investment-Grade Income Investor (VWESX - Free Report) . VWESX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.


The world of Investment Grade Bond - Long funds is an area filled with options, such as VWESX. With a focus on bonds that mature in more than 10 years, Investment Grade Bond - Long funds target the long end of the curve. Investors do inherit a higher duration risk with fixed income instruments at this maturity level, but these funds typically provide a higher yield, at least when compared to their short-maturity counterparts. Finally, investors should also note that the focus on investment grade does make these funds 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 VWESX. The Vanguard Long-Term Investment-Grade Income Investor made its debut in July of 1973 and VWESX has managed to accumulate roughly $4.78 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.


Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 7.05%, 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 10.22%, 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. Over the past three years, VWESX's standard deviation comes in at 7.67%, compared to the category average of 7.48%. The fund's standard deviation over the past 5 years is 7.7% compared to the category average of 7.7%. This makes the fund as volatile as its peers over the past half-decade.

VWESX carries a beta of 2.4, 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 0.22, 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, VWESX has 33.78% in high quality bonds rated at least 'AA' or higher, while 65.28% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.


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 0.85%. Looking at the fund from a cost perspective, VWESX is actually cheaper than its peers.

While the minimum initial investment for the product is $3,000, investors should also note that each subsequent investment needs to be at least $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, this fund looks like a somewhat average choice for investors right now.

For additional information on the Investment Grade Bond - Long 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 VWESX too 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.

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