A strong management team and sound investment process underpin Vanguard Long-Term Treasury ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy's effective investment approach earns an Above Average Process Pillar rating.  The strategy's parent organization earns the firm a High Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Vanguard Long-Term Treasury Index Fund earns an Above Average Process Pillar rating. Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. The main contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Noteworthy risk-adjusted performance also strengthens the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is: 

The investment seeks to track the performance of a market-weighted Treasury index with a long-term dollar-weighted average maturity.  The fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Long Treasury Index. This index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected bonds, floating rate securities and certain other security types), with maturities greater than 10 years. Under normal circumstances, and at least 80% of the fund's assets will be invested in bonds included in the index.  

 This strategy has a modest 3.5% 12-month yield, lower than its average peers' 4.0%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 4.5%. Typically, a lower yield comes with the benefit of less credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated AAA. In terms of long-term interest-rate risk, this strategy is on par with peers. The longer a strategy's duration, the more sensitive it is to shifts in interest rates. This fund, with a 15.2-year duration, is expected to gain 15.2% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

Above Average

Process

Vanguard’s fixed income team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. The fund takes a solo manager approach, with Joshua Barrickman as the only listed manager at the helm, who brings 18 years of portfolio management experience to the table. They manage a total of 19 strategies, with a Gold asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate. With only one manager listed on the strategy, the passive strategy is vulnerable to key-person risk.However, they have built history managing the strategy, it has not changed hands within the last five years. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

The Vanguard Group retains a High Parent rating. 

Mutual ownership, low costs, and a direct-to-investor playbook have helped spur Vanguard's leadership within the United States. Client service missteps notwithstanding, Vanguard over the past decade has grown its market share of U.S. open-end and exchange-traded fund assets at about a 5% annualized clip. At that rate, Vanguard's portion of the U.S. industry will cross 50% around 2035.

True, some competitors can now match or even undercut Vanguard on fees for broad market exposure. But Vanguard's burgeoning advice business could help it keep or even extend that lead. Through Digital Advisor and Personal Advisor Services, Vanguard has built an increasingly compelling ecosystem of advice for investors with simple to complex needs.

Vanguard is also using its advice business to expand overseas, but that's a work in progress. Of Vanguard's USD 7.6 trillion in global assets under management in March 2023, non-U.S. investors owned less than 10%, a figure that has changed little in recent years. Strategic shifts in China and other markets account for the slow pace, including returning money to institutions that had been layering on fees. Vanguard hopes to recoup that money and more by focusing on individual investors and the advisors who serve them. Provided Vanguard sticks to its playbook, its advantages should translate into success abroad, too.

High

Parent

Vanguard Long-Term Treasury ETF

VGLT tracks a market-value-weighted index of fixed income securities issued by the US Treasury, excluding inflation-protected bonds, with maturities of at least 10 years.

The fund tracks a market value-weighted index of fixed income securities issued by the US Treasury, excluding inflation-protected bonds, with maturities of at least 10 years.

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The Vanguard Long-Term Treasury Index Fund (VGLT) and the popular iShares 20+ Year Treasury Bond ETF (TLT) retreated after the blemish-free US non-farm payrolls (NFP) data. The TLT fund retreated by 90 basis points tpo $96.35% while the VGLT fell by 1% to $60.

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News for Vanguard Long-Term Treasury ETF ETF (VGLT)