Vanguard Short-Term Investment-Grade’s disciplined approach creates a repeatable process, yet the fund’s focus on corporate bonds makes it a less diversified option in the short-term bond Morningstar Category.
The process is consistent. The firm’s senior investment and taxable strategy committees shape macroeconomic views, setting broad risk parameters around duration, sector allocation, and credit outlook. Managers Arvind Narayanan and Dan Shaykevich collaborate with investment-grade specialists and the risk team to allocate risk within guidelines and refine portfolio construction. Like other Vanguard fixed-income strategies, this one avoids outsize bets of all kinds, maintaining a measured approach to risk. For example, the team keeps the portfolio’s interest-rate sensitivity, or duration, within a year of the benchmark’s. It also aims not to take outsize credit risk by keeping BBB exposure within 10 percentage points of the index’s. The managers have some flexibility to push these limits, but their focus remains on broad sector themes rather than issuer-specific overweightings. Despite its solid process, the managers typically keep most assets to corporate debt, making this fund a less sector-diversified option than many short-term bond category peers.
The firm’s solid fixed-income resources support this strategy. Lead manager Narayanan has managed this fund since late 2019 after joining Vanguard earlier that same year from State Street Global. He co-heads Vanguard’s investment-grade corporate sector team. Shaykevich, a comanager since 2018, also holds leadership roles, including co-heading the emerging-markets team.
The managers, however, balance numerous responsibilities, which could challenge their focus on this one. Narayanan’s duties, for example, include leading long-, intermediate-, and ultrashort-term strategies across multiple active bond funds, while Shaykevich is a named manager on at least 10 different strategies. These duties challenge the managers’ ability to give this strategy its proper due.
The strategy’s performance has lagged its typical peer under Narayanan’s tenure. Since December 2019 (his first full month), the Admiral shares’ 2.2% annualized gain through February 2025 beat the Bloomberg 1-5 Year Credit Index but slightly lagged the short-term bond category median. The fund’s long-duration profile relative to its peers has benefited during the falling yield environments, as seen in 2019, and stung during the rising yield environments, as seen in 2022.