Is VTABX a Strong Bond Fund Right Now?
Have you been searching for an International Bond - Developed fund? You might want to begin with Vanguard Total International Bond Index Admiral (VTABX). The fund does not have a Zacks Mutual Fund Rank, though we have been able to explore other metrics like performance, volatility, and cost.
The world of International Bond - Developed funds is an area filled with different choices, like VTABX. International Bond - Developed funds focus on fixed income securities from developed nations besides the United States. This usually results in countries like Japan, Germany, the UK, France, and Australia dominating the list of top holdings. Funds here offer geographic diversification, but they can also introduce currency risk into the picture as well.
History of Fund/Manager
Vanguard Group is based in Malvern, PA, and is the manager of VTABX. Vanguard Total International Bond Index Admiral made its debut in May of 2013, and since then, VTABX has accumulated about $52.46 billion in assets, per the most up-to-date date available. Joshua C. Barrickman is the fund's current manager and has held that role since May of 2013.
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 4.53%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 4.09%, 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. Over the past three years, VTABX's standard deviation comes in at 2.63%, compared to the category average of 7.77%. The fund's standard deviation over the past 5 years is 2.74% compared to the category average of 7.99%. This makes the fund less volatile than its peers over the past half-decade.
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. VTABX has a modified duration of 7.84, which suggests that the fund will decline 7.84% for every hundred-basis-point increase in interest rates.
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 2.15% means that a $10,000 investment should result in a yearly payout of $215.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur 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. This fund has a beta of 0.65, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, VTABX has a positive alpha of 1.73, which measures performance on a risk-adjusted basis.
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VTABX is a no load fund. It has an expense ratio of 0.11% compared to the category average of 0.99%. From a cost perspective, VTABX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $3,000 and that each subsequent investment needs to be at $1.
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