Vanguard Intermediate-Term Tax-Exempt’s VWIUX experienced leaders employ a disciplined approach to create a diversified portfolio, while its ultralow fee consistently gives them an edge over peers.
Vanguard’s municipal-bond team structure fosters collaboration, with specialists focusing on municipal sectors, rates, and money markets. Manager James D’Arcy, who specializes in various tax-backed sectors, has managed this strategy since 2013 and is ultimately responsible for portfolio positioning. The firm added veteran muni manager Mathew Kiselak as a comanager to this strategy in late 2023 as a part of its long-term succession planning. This team benefits from a deep municipal credit analyst bench and dedicated tax-exempt traders. They develop bottom-up views, set broad guidance for each portfolio’s positioning, and select the best-fitting credits.
The senior investment committee, which consists of Vanguard’s heads of various fixed-income areas, oversees Vanguard’s fixed-income strategies and provides macroeconomic guidance for the firm’s managers. Paul Malloy, a member of that group, took over leadership of the firm’s muni team in 2018 and has overseen the broader municipal platform throughout his tenure.
Its disciplined structure establishes a time-tested process, and when combined with a low fee, creates an edge over peers. The team aims to construct a broadly diversified, high-quality portfolio that delivers strong risk-adjusted returns. D’Arcy incorporates guidance from the muni group to position the portfolio and uses a custom benchmark that loosely represents a higher-credit-quality version of the Bloomberg Municipal 1-15 Year Index. Rather than making outsize bets on individual names, teams focus on thoughtful structural trades along the muni yield curve and relative value discussions across broad sectors of the muni market.
The strategy has delivered compelling long-term absolute and volatility-adjusted returns. Over lead manager D’Arcy’s tenure since July 2013 (his first full month), the Admiral shares’ 2.6% annualized gain through March 2025 outpaced more than 70% of the muni-national intermediate category and beat the Bloomberg Municipal 1-15 Year Index by 24 basis points. The strategy’s Sharpe ratio (a measure of excess return relative to excess standard deviation) also ranked in the category’s top quartile.
The strategy’s bias to higher-quality bonds versus peers has helped it keep pace with peers in normal periods and hold up better during periods of credit stress. For example, the outperformance of below-investment-grade debt over investment-grade bonds led to slight underperformance versus peers in 2024. The fund’s 1.8% gain that year outpaced its index by 90 basis points, but it trailed the peer median’s 2.1% return. The strategy had a solid year in 2020 despite market volatility in the first quarter; its 5.2% gain for the calendar year landed in the top quartile of distinct peers. In the choppy markets of 2022 and 2023, the strategy provided some protection as selection in pollution control and industrial development revenue bonds helped in 2022, and picks within general-obligation bonds, electric/gas, leasing, and special assessment supported stronger returns in 2023.
This fund remains one of the top active muni offerings and has served investors well over time.