Vanguard Short-Term TreasuryVFISX

Morningstar Rating

Fund Research and Analysis

by Michael Herbst

It's a matter of when, not if, Vanguard Short-Term Treasury will hit choppy waters.

This fund benefited a great deal from the market's turmoil in late 2007 through early 2009. Falling interest rates gave it a boost, as did investors' thirst for highly liquid, credit risk-free U. Read more

Kudos

Low expenses have resulted in solid returns.

U.S. Treasuries can provide protection when bouts of uncertainty upset the market. Read more

Risks

Narrow mandate means the fund tends to lag its peers when mortgage-backed and agency bonds rally.

U.S. Treasuries are sensitive to changes in interest rates and thus court considerable volatility. Read more

Strategy

Management is required to keep at least 80% of assets in Treasuries, and although it does hold agency bonds, it leaves the mortgage-backed market to its sibling, Vanguard Short-Term Federal VSGBX. Manager David Glocke typically keeps the portfolio's duration between 2. Read more

Management

David Glocke assumed day-to-day management duties of this fund in May 2000. He is assisted by the head of Vanguard's fixed-income team, Bob Auwaerter, who sets the firm's interest-rate policy. Read more

Inside Scoop

This fund invests primarily in U.S. Treasuries, so investors here can worry less about credit or prepayment risk than with other offerings. Its strong long-term performance and healthy yield stem in part from the fund's rock-bottom expenses. Read more

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