Vanguard Long-Term Investment-Grade Fund Investor Shares VWESX

Vanguard named Blanton Keh as a comanager of Vanguard Long-Term Investment-Grade effective April 16, 2026. The appointment does not alter the strategy's Above Average People and Process Pillar ratings or its overall Morningstar Medalist Rating.

Keh’s expertise complements this strategy well. He joined Vanguard in September 2025 from Western Asset, where he spent more than two decades and about four years as manager of Western Asset Corporate Bond. Since arriving at Vanguard, Keh has worked closely with lead manager Arvind Narayanan as he transitions into a portfolio management role on this strategy.

Keh adds depth to the team, brings a valuable perspective on the long-duration strategies, and will help shape portfolio positioning alongside Narayanan.

Vanguard Long Term Investment Grade leverages two experienced subadvisor teams that each deliver a thoughtful and repeatable approach.

Vanguard’s March 2025 decision to evenly split the fund's assets between its two subadvisors, Wellington Management and Vanguard Fixed Income Group, follows a history of increasing the allocation to the latter. For decades, Wellington had served as the sole subadvisor until the in-house Vanguard Fixed Income Group began running 10% of assets in December 2013. Then, in August 2021, Vanguard's target weighting increased to 25%. The shift to a 50/50 split should occur gradually as money enters or exits the strategy. In December 2025, Vanguard's sleeve stood at 34%, up from 22% a year earlier.

Both Wellington and Vanguard’s fixed-income teams stand out from competitors in terms of resources, experience, and size. The two subadvisors manage their sleeves independently, without collaboration. On the Wellington side, longtime manager Scott St. John continues to oversee the sleeve, drawing support from the firm’s deep investment-grade credit platform.

On Vanguard’s side, investment-grade corporate specialist Arvind Narayanan has led the sleeve since late 2019, working alongside comanager Daniel Shaykevich and drawing support from a seasoned analyst team. The firm continues to evolve and strengthen the fixed-income platform. While not formally named, Blanton Keh adds depth following his 2025 arrival from Western Asset, contributing corporate expertise that broadens the team’s long-term bond perspective, though the full impact of his addition is still unfolding.

The two subadvisors each stick to a risk-aware and repeatable process, and the approach targets institutional investors seeking to match long-dated liabilities. The portfolio primarily invests in higher-quality corporate bonds with maturities of 20 years or longer, making it among the more interest-rate-sensitive offerings in Morningstar’s taxable-bond universe. To better reflect this profile, the fund moved to the long-term bond Morningstar Category from the corporate bond category in 2019. The fund’s duration (a measure of interest rate sensitivity) has generally remained close to that of the Bloomberg US Long Credit A or Better Index and category peer median, consistent with the subadvisors’ preference for avoiding large interest rate bets.

The team had success up until the strategy moved categories in April 2019, thanks to a decade of falling yields and strong security selection. Since then, the Admiral shares' 1.5% annualized return through February 2026 outpaced the index by 18 basis points but trailed the long-term bond category peer median by 22 basis points.

Deep fixed-income resources at both subadvisors support a disciplined and repeatable process that justifies an Above Average Process rating.

Vanguard and Wellington manage the portfolio in two distinct sleeves, with each subadvisor implementing its own style without collaboration. Wellington manages roughly two-thirds of the fund’s assets as of year-end 2025, though Vanguard has directed a gradual 50/50 split. As money enters or exits the fund, Vanguard uses cash flows to adjust allocations between subadvisors rather than making abrupt reallocations.

At Wellington, Scott St. John applies a time-tested credit research framework, drawing on quarterly discussions with the firm’s fixed-income managers to inform sector positioning and credit-quality tilts. He then taps into Wellington’s well-resourced analyst team and proprietary tools to construct the portfolio.

Vanguard’s process reflects a disciplined and thoughtful approach to credit risk. The firm’s senior fixed-income leaders develop macroeconomic scenarios to set broad risk parameters. Managers advocate for risk budget changes when they identify sustained risks or opportunities and collaborate with sector teams to shape the portfolio, while a dedicated risk team provides ongoing oversight.

The strategy best suits institutional investors seeking to match long-dated liabilities using long-duration, high-quality corporate bonds. The team’s long-term orientation and Vanguard’s disciplined approach result in one of the category’s lowest turnover profiles, as managers adjust exposures gradually as the market conditions evolve. The portfolio’s duration (a measure of interest rate sensitivity) tends to align with its Bloomberg US Long Credit A or Better Index and long-term bond category peer median.

This long-dated focus affects the portfolio's sector makeup, with most assets allocated to corporate debt (roughly 80% of assets as of December 2025), along with some taxable munis (8%) and Treasuries (8%). Both subadvisors primarily invest in higher-quality debt, though their credit mix may differ.

For instance, Wellington's credit-quality profile is typically higher than Vanguard's. Wellington's sleeve typically has around 5% of assets invested in BBB rated debt, whereas Vanguard's stake has consistently exceeded 10%. In December 2025, Vanguard's 12% stake was roughly 8 percentage points higher than Wellington's. Overall, the portfolio maintains a modest 7% allocation to BBB rated debt, significantly lower than its typical peers’, which hold more than a third of assets in BBB rated issues. The bulk of this portfolio’s assets (63%) were in A rated debt, and roughly 28% in AA and AAA rated bonds combined, which can add protection in rough credit markets.

Within the corporate bond allocation, the fund features about one-fifth of assets in financials, but because of the light supply of these issuers at the long end of the yield curve, the December 2025 portfolio held 19% in financials, with an emphasis on large US banks with strong balance sheets, along with some hard-hit regional bank debt added in early 2023. The portfolio still maintains most of its assets in industrials (45%).

To maintain its long duration, the portfolio typically keeps more than 60% in bonds with maturities longer than 20 years. The fund's duration typically sits within a year of its index, given Vanguard’s preference to avoid large interest rate bets. Its 12.2-year duration as of December 2025 was in line with its index and peer median.

Experienced and capable managers, as well as deep supporting resources, drive the strategy’s Above Average People rating.

Both Wellington and Vanguard’s fixed-income teams stand out from competitors in terms of resources, experience, and size. Wellington veteran Scott St. John began comanaging this fund in 2014. He brings more than three decades of experience and took sole responsibility for the Wellington sleeve in 2016. He joined the firm in 2003 after stints as an analyst at State Street Research and Eaton Vance and now serves as chair of the firm's US corporate bond strategy group.

St. John draws support from Wellington's deep resources. He works alongside unnamed managers Sean Lamkin and Noah Atlas, who each bring roughly 15 years of industry experience, and a large group of fundamental fixed-income and equity analysts, economists, and a quantitative group. While St. John is responsible for fund positioning, Lamkin and Atlas' responsibilities have increased in recent years.

Vanguard’s seasoned managers lead their respective sleeve, while the supporting group continues to evolve as responsibilities become clearer. Industry veteran Arvind Narayanan has led the sleeve since November 2019 and now leads the firm’s investment-grade corporate sector group, bringing deep experience in corporate credit and long-duration strategies from his time at State Street Global Advisors and General Electric. He partners with Daniel Shaykevich, who has comanaged the strategy since 2018. Although not formally named, Blanton Keh contributes to portfolio decisions. Keh joined the firm from Western Asset in September 2025, where he spent more than two decades and managed their corporate-bond strategy. While Keh is still settling into his role, his addition is encouraging and creates team depth.

Manager ownership, which reflects alignment with investors, could be better. St. John has a personal stake between USD 100,001 and USD 500,000, and Shaykevich has between USD 10,001 and USD 50,000. Narayanan does not have personal stakes in this fund.

Vanguard maintains its High Parent Pillar rating as it continues to grow under new leadership.

CEO Salim Ramji has had a busy first year captaining Vanguard’s crew, and the ship remains pointed in the right direction. The firm made its largest round of fee cuts in early 2025, which came at an estimated cost of USD 350 million. It established a separate division dedicated to its advice and wealth management efforts, a sign that it wants to seriously compete within those lines of business. Asset growth has continued to be a huge success. Only BlackRock’s inflows rival the money Vanguard is taking in. Likewise, the number of clients it serves has more than doubled since 2015.

Despite that success, an ever-growing number of clients has presented a challenge: Vanguard can’t grow its services fast enough to keep up with demand. In some instances, it has had to curb certain services and capabilities or raise fees on others to cope, causing some loyal clients to criticize what they perceive as deteriorating services.

Vanguard has ambitions to bring its disruptive legacy to the bond market. It created roughly a dozen low-cost bond exchange-traded funds for US investors and several others abroad over the 12 months through June 2025. All have low fees in their respective categories, and the actively managed strategies align with Vanguard’s philosophy. They are relatively easy to understand and are conservatively managed.

Vanguard has another opportunity to prove that clients are still its priority. On the surface, its endeavor into the high-fee deal-making world of private assets alongside Wellington and Blackstone looks like a cultural mismatch. So far, the collaboration hasn’t produced anything that’s concerning.

The strategy posted solid results before its April 2019 move to the long-term bond category, supported by a decade of falling yields and strong security selection, but it has had a harder time outpacing peers since the category change.

From April 2019 through February 2026, the Admiral shares' 1.5% annualized gain beat the Bloomberg US Long Credit A or Better Index's 1.3% return but trailed the long-term bond category peer median's 1.7% gain. Its information ratio (a measure of excess return relative to excess standard deviation) also trailed roughly half of its category peers over the same period. The underperformance versus most peers reflects the fund's higher-quality bias.

But this bias allows it to hold up better than most rivals when markets get rocky. For example, during March 2020's pandemic-driven selloff, the strategy provided better protection than most options in the category, thanks to a combination of falling long-term yields and credit turmoil. The fund's 5.5% loss was less severe than the peer median's 6.9% decline. It also outperformed peers over the full calendar year; its 15.5% gain outpaced the peer median of 14.2%.

However, less credit risk relative to category rivals stung the performance in 2024. The fund's 2.7% loss beat the index by 30 basis points but was steeper than the typical peers' 1.5% decline.

In 2025, security selection in financial sectors benefited the performance; its 7.3% gain that year outperformed more than half of the category peers.

Vanguard Long-Term Investment-Grade Inv's Prospectus Adjusted Expense Ratio is 0.21% per year. It places it in the second-cheapest quintile of the Morningstar US Fund Long-Term Bond Category, where the median fee is 0.49% per year. This cost positioning translates into a Medalist Rating Price Score of 0.62, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.