Emory Zink: Compared with most funds bearing a high-yield muni moniker, Vanguard High-Yield Tax-Exempt looks conservative--so much so that it places in Morningstar's muni-national intermediate category rather than the high-yield muni category.
The idea is for manager Matthew Kiselak and his team to provide competitive returns from across the municipal credit spectrum, while remaining acutely risk-conscious. For example, the fund avoids controversial credits, such as municipal tobacco and exposure to Puerto Rico, while historically favoring sectors with stable cash flows, such as transportation and healthcare. Average credit quality is higher than a typical municipal high-yield peer but more adventurous than most funds in the muni-national intermediate category.
The fund's 19 annual basis point fee for its investor shares supports this greater flexibility to pare back risk and still deliver compelling returns. For example, over the trailing 10 years ending March 2017, the fund generated 4.5% of annualized return, outpacing the average of either category on an absolute and risk-adjusted basis.
Low fees, prudent management, and attractive performance earn the fund a Morningstar Analyst Rating of Silver.