Vanguard Intermediate-Term Corporate Bond ETF: A Low-Cost, High-Quality Bond Portfolio

The Vanguard Intermediate-Term Corporate Bond ETF (VCIT) offers an inexpensive and well-constructed portfolio of investment-grade corporate bonds with 5-10 years to maturity. The fund has a Morningstar Medalist Rating of Gold and tends to overweight higher-quality bonds. Its intermediate-term remit skews its duration to the shorter side, but it remains a precise tool for investors targeting high-quality corporate bonds. The ETF share class has outperformed the category average by 39 basis points since its 2009 inception.

The Vanguard Intermediate-Term Corporate Bond ETF (VCIT) has garnered significant attention for its performance and investment strategy. As of July 2, 2025, the fund holds a Morningstar Medalist Rating of Gold, reflecting its strong performance and construction. VCIT offers an inexpensive and well-constructed portfolio of investment-grade corporate bonds with a maturity of five to 10 years.

The fund's strategy involves overweighting higher-quality bonds, with over 40% of its assets invested in A-rated bonds as of May 2025, compared to the category average of 30% [1]. This focus on quality has helped VCIT protect against widening credit spreads during market shocks. The fund's intermediate-term remit skews its duration to the shorter side, with an average duration of 6.1 years as of May 2025, compared to the category average of 6.5 years [1].

Since its 2009 inception, VCIT has outperformed the category average by 39 basis points, demonstrating its ability to deliver consistent performance. This outperformance can be attributed to the fund's low fees, broad portfolio, and tilt toward quality and lower duration [1]. During the first five months of 2025, VCIT outpaced the category average by 1 percentage point, as investors sought safer assets amid market volatility [1].

The fund's shorter duration has also contributed to its relative performance. In 2022, VCIT beat the category average by 1.1 percentage points, as assets with longer duration suffered from rising rates and inflationary fears [1]. The fund's current duration is not too far off from that of its average peer, suggesting that performance differences may be smaller in the future.

In the current fixed income landscape, income is more attractive than duration due to heightened uncertainty and unreliable market correlations [2]. Prioritizing income over duration allows investors to seek attractive returns from high-quality borrowers with minimal duration risk. Tax-exempt municipal bonds have provided a stable source of return across time and can be valuable additions to portfolios amid market volatility and uncertainty [2].

VCIT remains a precise tool for investors targeting high-quality, intermediate-term corporate bonds. Its low fee structure should preserve its performance edge over the long run, making it a strong option for investors seeking a well-constructed, low-cost bond portfolio.

References:

[1] https://www.morningstar.com/funds/build-your-portfolio-with-this-vanguard-corporate-bond-etf
[2] https://www.blackrock.com/us/financial-professionals/insights/fixed-income-outlook