Is VAIPX a Strong Bond Fund Right Now?

Having trouble finding a Government - Bonds: Misc fund? Vanguard Inflation Pro Security Admiral (VAIPX) is a possible starting point. VAIPX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

VAIPX is one of many Government - Bonds: Misc funds to choose from. In their portfolios, Government - Bonds: Misc funds hold securities issued by the United States' federal government, which are often seen as risk-free assets and described as extremely low-risk from a default perspective. While a mixed approach usually results in a medium yield and risk profile, this fund category focuses across the curve, meaning the yields and interest rate sensitivity will vary.

History of Fund/Manager

Vanguard Group is responsible for VAIPX, and the company is based out of Malvern, PA. Since Vanguard Inflation Pro Security Admiral made its debut in June of 2005, VAIPX has garnered more than $14.06 billion in assets. The fund is currently managed by Gemma Wright Casparius who has been in charge of the fund since August of 2011.

Performance

Investors naturally seek funds with strong performance. VAIPX has a 5-year annualized total return of 1.18% and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 1.47%, 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. VAIPX's standard deviation over the past three years is 3.27% compared to the category average of 6.69%. Over the past 5 years, the standard deviation of the fund is 3.73% compared to the category average of 6.88%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.

For those that believe interest rates will rise, this is an important factor to consider. VAIPX has a modified duration of 7.6, which suggests that the fund will decline 7.6% for every hundred-basis-point increase in interest rates.

Income

Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 0.7% means that a $10,000 investment should result in a yearly payout of $70.

While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.

Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. VAIPX carries a beta of 1.02, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -1.01, which measures performance on a risk-adjusted basis.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, VAIPX is a no load fund. It has an expense ratio of 0.10% compared to the category average of 0.80%. Looking at the fund from a cost perspective, VAIPX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $10,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard Inflation Pro Security Admiral ( VAIPX ) 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.

Want even more information about VAIPX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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