Vanguard High-Yield CorporateVWEHX

Morningstar Rating

Fund Research and Analysis

by Michael Herbst

Vanguard High-Yield Corporate remains a gem, but now may not be the time to pile into it.

We've long appreciated this fund's cautious management, long-term outlook, and low fees. Those traits are the main reasons why it remains both a Fund Analyst Pick and a particularly attractive offering for investors seeking a healthy income stream. Read more

Kudos

Above-average long-term returns while taking on less credit risk than most high-yield funds.

Lowest expenses in the high-yield category.

Management's buy-and-hold approach keeps a tight lid on trading costs. Read more

Risks

Because the fund focuses on higher-quality high-yield bonds, it tends to lag its peers during rallies.

The fund is more interest-rate-sensitive than its average peer because of its tilt toward investment-grade fare.

In past years, the fund has had a below-average yield. Read more

Strategy

Historically, this fund has focused primarily on delivering a steady income stream. Management invests mainly in higher-quality junk bonds, with the bulk of assets parked in BB and B rated credits, along with a smattering of investment-grade bonds. Read more

Management

This fund is subadvised by Wellington Management Company. Current skipper Michael Hong took over for longtime predecessor Earl McEvoy in June 2008, yet Hong is no newcomer to the fund or its strategy. Prior to taking over, he served as the firm's director of high-yield credit research. Read more

Inside Scoop

This fund stays in the shallow end of the high-yield bond pool. It doesn't take on as much credit risk as its typical peer, and volatility is relatively mild. Management's efforts to keep a lid on trading costs, as well as the fund's rock-bottom expense ratio, takes a smaller bite out of the fund's income stream. Read more

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