Best-Performing Vanguard Mutual Funds In Q3 Of 2015

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Includes: VCAIX, VCITX, VEDTX, VFITX, VGHAX, VGPMX, VMATX, VNYTX, VOHIX, VPAIX, VUSTX, VWAHX, VWESX, VWLTX
by: Zacks Funds

Calling the third quarter a bloodbath will not be far from the truth. In this quarter, the Dow, S&P 500 and Nasdaq declined 7.6%, 7% and 7.4%, respectively. In the third quarter, just 17% of mutual funds managed to finish in the green. China-led global growth fears, uncertainty about the Fed rate hike followed by the no lift-off decision, the sell-off in biotech stocks and tumbling commodity prices, among other factors, resulted in the worst quarter in four years.

In a quarter ravaged by such headwinds, mutual funds from the Vanguard Group gave a decent performance. Its best gain hit 8.4%, achieved by Vanguard Extended Duration Treasury Index Fund Institutional (MUTF:VEDTX). This fund, which requires a minimum initial investment of $5,000,000, was in fact the top performer among the Long Government Bond Funds. The commendable gain came not only when the markets suffered a rout, but at a time when the U.S. Fed was preparing for a possible rate hike at the end of this year.

As for the worst performer, Vanguard Precious Metals & Mining Fund Investment (MUTF:VGPMX) slumped to a loss of 21.9%. This was in line with the performance of the fund category. Morningstar data showed that the Equity Precious Metals category had lost 19.4% in the third quarter.

Vanguard's Q3 Performance vs. Q2

Popular for offering the no-load mutual funds, the top-performing Vanguard funds gave a better performance than those in the second quarter. As mentioned earlier, VEDTX gained 8.4%. In the second quarter, Vanguard's top performer was the Vanguard Health Care Fund (MUTF:VGHAX), which had gained just 3.8%. However, the magnitude of losses increased significantly in the quarter.

Of the 258 funds under our study, 79 funds ended in the positive territory in the third quarter. The average gain for these 79 funds was 1.9%. This was an improvement from the average 0.8% gain scored by 101 Vanguard funds that had finished in the green in the second quarter. However, in the third quarter, the remaining 179 funds finished with losses averaging -8%. In the second quarter, of the 257 funds under our study, 156 funds had ended in the negative territory, with an average loss of 1.8%.

Among the 79 gainers in the third quarter, only 8 funds posted above 5% return. On the other hand, 58 funds posted returns lower than 2%. Out of the 179 funds that finished in the red this time, only 30 funds had a sub-5% loss. Meanwhile, 45 funds lost by at least 10%. (Note: These numbers include same funds with varied asset classes.)

Vanguard's performance in the third quarter was also relatively better than that of many of its key peers. For instance, its top gaining fund had higher returns than the best gainers from Fidelity, BlackRock (NYSE:BLK), Wells Fargo (NYSE:WFC) and American Funds. In the second quarter, Vanguard had failed to beat any of these fund families. However, this time, it failed to beat the third-quarter performance of T. Rowe Price (NASDAQ:TROW).

Top-Performing Vanguard Mutual Funds

Fund Name

Objective Description

Q3 Total Return

Q3 % Rank vs. Obj.

YTD Total Return

% Yield

Expense Ratio

Beta vs. S&P 500

Vanguard Long-Term Treasury Inv

Government

5.44

2

0.08

2.63

0.2

-0.04

Vanguard Long-Term Inv-Gr Inc Inv

Corp.-Inv.

2.63

1

-2.29

4.18

0.22

0.03

Vanguard Long-Term Bond Index Inv

Dvsfd Bond

2.32

1

-2.49

3.97

0.18

-0.01

Vanguard CA Long-Term T-E Inv

Muni CA

2.08

8

1.88

3.12

0.19

-0.05

Vanguard MA Tax-Exempt Fd

Muni State

2.01

2

1.79

2.68

0.15

-0.04

Vanguard Interm-Term Treasury Inv

Government

2

5

2.77

1.58

0.2

-0.02

Vanguard OH Long-Term Tax-Exmpt Fd

Muni State

2

2

1.95

2.96

0.15

-0.03

Vanguard REIT Index Inv

Real Est

1.95

35

-4.49

3.77

0.26

0.55

Vanguard NY Long-Term T/E Inv

Muni NY

1.88

7

1.8

2.91

0.19

-0.01

Vanguard PA Long-Term Tax-Exmpt Inv

Muni State

1.88

4

1.81

3.17

0.19

-0.02

Vanguard Long-Term Tax-Exempt Inv

Muni Natl

1.81

9

1.51

3.23

0.19

-0.02

Vanguard High-Yield Tax-Exempt Inv

Muni Natl

1.77

10

1.58

3.24

0.19

0.01

Vanguard CA Interm-Term T-E Inv

Muni CA

1.74

31

1.53

2.46

0.19

-0.03

Vanguard Interm-Term Bd Index Inv

Corp.-Inv.

1.73

1

1.93

2.27

0.18

-0.01

Vanguard Interm-Term Tax-Exempt Inv

Muni Natl

1.58

19

1.23

2.56

0.19

-0.01

Note: The list excludes the same funds with different classes, and institutional funds have been excluded. Funds having minimum initial investment above $5000 have been excluded.
Q3 % Rank vs. Objective* equals the percentage the fund falls among its peers. Here, 1 being the best and 99 being the worst.

The list of top 15 Vanguard fund performers is dominated by funds belonging to the Municipal bond funds category. Nine of the 15 funds belong to this category. This was expected as many sub-Municipal fund categories, such as Muni California Long, Muni Pennsylvania and Muni New York Long, featured in the top performers list for the third quarter, according to Morningstar data. However, the gains were modest, with Muni California Long performing the best, notching up a 1.7% gain in the quarter.

Among the best-performing Vanguard Municipal Bond funds, Vanguard California Long-Term Tax Exempt Fund Investment (MUTF:VCITX) gained 2.1% and was the best performer. The other funds from this category were Vanguard Massachusetts Tax-Exempt Fund Investment (MUTF:VMATX), Vanguard Ohio Long Term Tax Exmpt Fund Investment (MUTF:VOHIX), Vanguard New York Long Term Tax Exempt Fund Invesment (MUTF:VNYTX), Vanguard Pennsylvania Long Term Tax Exmpt Fund Investment (MUTF:VPAIX), Vanguard Long Term Tax Exempt Fund Investment (MUTF:VWLTX), Vanguard High Yield Tax Exempt Fund Investment (MUTF:VWAHX) and Vanguard California Intermediate Term Tax Exempt Fund Investment (MUTF:VCAIX).

Moreover, all these funds carry a favorable Zacks Mutual Rank. VCITX, VMATX, VOHIX, VNYTX, VPAIX, VWLTX, VWAHX carry Zacks Mutual Fund Rank #1 (Strong Buy), while VWITX holds a Zacks Mutual Fund Rank #2 (Buy).

However, the best gainer from this list was a Government Bond Fund - Long, Vanguard Long Term Treasury Fund Investment (MUTF:VUSTX), which added 5.4% in the quarter. Another fund from the category, Vanguard Intermediate Term Treasury Fund Investment (MUTF:VFITX), was up 2% and was the sixth best gainer. Both VUSTX and VFITX carry a Zacks Mutual Fund Rank #1. Vanguard Long Term Investment Grade Fund Investment (MUTF:VWESX), also carrying a Strong Buy rank, from the Investment Grade Bond Category, gained 2.6% and was the second best performer.

While none of the funds carried an unfavorable Zacks Mutual Fund Rank, Vanguard Long-Term Bond Index Inv (MUTF:VBLTX), Vanguard REIT Index Inv (MUTF:VGSIX) and Vanguard Interm-Term Bd Index Inv (MUTF:VBIIX) currently carry a Zacks Mutual Fund Rank #3 (Hold).

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