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By Elizabeth Foos | 07-31-2017 12:00 PM

A Silver-Rated Vanguard Fund for Long-Term Bond Investors

Vanguard Long-Term Investment-Grade Fund has performed well, but it is one of the most interest-rate-sensitive taxable bond funds.

Beth Foos: The Vanguard Long-Term Investment-Grade Fund is good at what it's designed to do. The fund's solid long-term record, strong team, and low expenses earn it a Morningstar Analyst Rating of Silver.

In June of 2016, the lead manager of this fund, L.T. Hill, retired from Wellington Management Company, this fund's longtime subadvisor. Comanager Scott St. John, who worked closely with Hill for more than a decade, assumed sole responsibility for the Wellington-run portion of the fund (which makes up about 90% of its assets). Because the firm takes a team-based approach, this hasn't caused significant disruption to the team or its process.

This fund invests in long-term investment-grade bonds, and the team notes it's particularly attractive to institutional investors looking to match long-dated liabilities. For example, with a nearly 14-year average duration, it ranks among the most interest-rate-sensitive in Morningstar's taxable-bond universe. It gets there by staying close to its Bloomberg Barclays U.S. Long Credit A or Better Index.

With that, and thanks to generally falling yields over the past decade, this fund's long-term performance has been solid. On a total return and risk-adjusted basis its long-term results compare well to its benchmark and its category peers. That said, patience is required here. While this fund is hard to beat when Treasury yields dip, performance can lag when rates spike. Yet overall, it's worth a look for investors on the long end of the curve.

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