Key Morningstar Metrics for Vanguard Intermediate-Term Corporate Bond ETF
- Morningstar Medalist Rating: Gold
- Process Pillar: Above Average
- People Pillar: Above Average
- Parent Pillar: High
Vanguard Intermediate-Term Corporate Bond ETF VCIT offers an inexpensive and well-constructed portfolio of investment-grade corporate bonds set to mature in five to 10 years.
The Bloomberg US 5-10 Year Corporate Bond Index, which underpins this fund, sweeps in investment-grade corporate bonds with five to 10 years remaining to maturity. The index excludes riskier types of bonds such as floating-rate notes, contingent capital securities, and bonds with equity features. Eligible bonds must also have at least $300 million outstanding face value, which increases the investability of the index. It weights bonds by their market value, which is an efficient and cost-effective approach to the vast and relatively liquid investment-grade bond market.
The fund tends to overweight higher-quality bonds compared with its average Morningstar Category peer. It parked more than 40% of its assets in A rated bonds as of May 2025, 10 percentage points more than the category average. More flexible active category peers often take on a small position in high-yield bonds instead in their quest to add incremental value. Bypassing riskier bonds has helped this fund better protect against widening credit spreads during credit shocks.
Nonetheless, over half the fund’s portfolio carries BBB credit ratings, in line with the category average and other broad passive category peers. The fund’s more conservative credit risk profile might miss out on some upside when credit spreads tighten, but it should still participate in most rallies.
Its intermediate-term remit slightly skews its duration to the shorter side of its category. As of May 2025, its average duration stood at 6.1 years compared with 6.5 years for the category average. This gap fluctuates depending on market trends; it was wider in 2020 and 2021 when companies issued longer-term bonds amid low interest rates, and it narrowed in 2022 when interest rates rose.
The fund remains a precise tool for investors targeting high-quality, intermediate-term corporate bonds. Its low fee should preserve its performance edge over the long run. The exchange-traded fund share class has beaten the category average by 39 basis points between its 2009 inception and May 2025.
Vanguard Intermediate-Term Corporate Bond ETF: Performance Highlights
Differences between this portfolio and the category average have helped the ETF share class outperform the category average by 39 basis points annualized from its 2009 inception through May 2025. The fund’s low fee and broad portfolio contributed to its excess returns, and its tilt toward quality and lower duration also worked to its benefit. Most recently, it outpaced the category average by 1 percentage point during the first five months of 2025 as investors flocked to safer assets amid volatility in the market.
The fund has consistently held up better than peers when credit spreads widen, thanks to its relatively muted credit risk profile. The fund outpaced its category average by 1.45 percentage points during the coronavirus-driven shock in 2020 from Feb. 20 through March 23. On the other hand, it will miss out when credit risks are rewarded. The fund trailed the average category peers by 1.86 percentage points between late March and December that year as credit spreads rapidly compressed.
The fund’s shorter duration has also added to its relative performance. The fund beat the category average by 1.1 percentage points in 2022 as assets with longer duration suffered from rising rates and inflationary fears. This duration gap was wider coming into 2022 as low interest rates incentivized firms to issue longer-term bonds and skewed the average duration of the market. The fund’s current duration is not too far off from that of its average peer and will likely result in smaller performance differences.