Why We Downgraded Vanguard Short-Term Bond Index Fund ETF

Doubts about Vanguard Short-Term Bond Index Fund ETF Shares’ BSV benchmark prompted a Process Pillar rating downgrade to Average from Above Average, reducing its Morningstar Medalist Rating to Bronze from Gold.

The Bloomberg US 1-5 Year Government/Credit Index that the fund tracks includes investment-grade corporate and government bonds with maturities between one and five years. It determines position size based on market value, a factor that has led to a severe overweighting in Treasury securities compared with its short-term bond Morningstar Category peers. The fund, on average, allocates 70% to these securities versus its peers’ 25%. This conservative approach can provide downside protection in times of market stress but comes with a cost. The higher Treasuries weighting gives it a lower yield than most of its peers in a category where yield drives returns, limiting its ability to keep up in the long run.

The exchange-traded fund still benefits from Vanguard’s large and experienced fixed-income index team, so it still has an Above Average People rating. It taps into a global network of portfolio managers, sector specialists, and trading desks to deliver accurate index tracking. Lead manager Josh Barrickman oversees portfolio construction and works closely with traders and specialists.

Key Morningstar Metrics for Vanguard Short-Term Bond Index Fund ETF

Morningstar Medalist Rating: Bronze

Process Pillar: Average

People Pillar: Above Average

Parent Pillar: High

Experienced Team of Investors

Increased confidence in Janus Henderson Global Technology and Innovation’s JATNX managers Denny Fish and Jonathan Cofsky and their team resulted in a People Pillar upgrade to Above Average from Average, boosting its Morningstar Medalist Rating to Bronze from Neutral.

Fish joined as comanager in 2016 and became lead manager in 2018. He has more than 20 years of experience and leads the firm’s tech research team. Cofsky brings 20 years of experience and became an assistant manager in 2020; in 2022, he was promoted to comanager. Confidence in the pair has increased as concerns regarding personnel turnover have eased. Despite several departures over the past decade, the firm has successfully rebuilt and expanded the supporting research platform. Today, Fish and Cofsky are backed by seven analysts and two associates, up from four analysts and one associate in 2024, providing greater depth across key technology industries.

Key Morningstar Metrics for Janus Henderson Global Technology and Innovation Fund Class N

Morningstar Medalist Rating: Bronze

Process Pillar: Above Average

People Pillar: Above Average

Parent Pillar: Average

Resetting Expectations

Changes to T. Rowe Price Spectrum Income’s TSPNX portfolio construction approach reduce confidence in the team’s ability to generate an edge, resulting in a People Pillar downgrade to Average from Above Average, lowering its Morningstar Medalist Rating to Bronze from Silver.

In recent years, the fund has been reshaped into what looks more like a traditional multisector bond fund. In March 2025, the fund eliminated its equity sleeve, reduced core-bond exposure, and increased its helping of income-focused fixed-income sectors. The management trio still leans on T. Rowe Price’s philosophy and research to select underlying strategies and make tactical adjustments. The strategy now depends more on fixed-income sector allocation and the results of its underlying bond managers, a structure that doesn’t provide a distinct advantage.

Key Morningstar Metrics for T. Rowe Price Spectrum Income Fund I Class

Morningstar Medalist Rating: Bronze

Process Pillar: Average

People Pillar: Average

Parent Pillar: Above Average

Hyper-Concentration Risk

Baron Asset Fund Institutional Class’ BARIX extreme concentration merits downgrading its Process rating to Above Average from High, reducing its Medalist Rating to Bronze from Silver.

The team’s patient and well-defined approach has merit; the team targets shares of businesses that can double within five years owing to several key factors. Lead manager Andrew Peck, however, has allowed shares of Space Exploration Technologies SpaceX to balloon up to 34% of assets, which has dramatically increased the risk profile of a fund that usually has been well-diversified. The position is inconsistent with Peck’s historical practice of limiting exposure to riskier, less-proven businesses. The team plans to reduce SpaceX exposure, as shares become tradable, into the mid- to high-single digits. For now, though, investors should expect SpaceX’s results to dominate the portfolio and its performance.

Key Morningstar Metrics for Baron Asset Fund Institutional Class

Morningstar Medalist Rating: Bronze

Process Pillar: Above Average

People Pillar: Above Average

Parent Pillar: Above Average

Conservative to a Fault

Decreased confidence in Fidelity Advisor Short-Term Bond’s FIKTX conservative approach warranted a Process Pillar downgrade to Average from Above Average, lowering its Morningstar Medalist Rating to Silver from Gold.

This fund’s conservative approach protects investors’ capital during downturns but limits it in the long run. Even when comparing this fund with a conservative subset of peers, it has struggled to keep up. In the past few months, the portfolio has become even more defensive. Treasury securities exposure has increased to 47%, while securitized and corporate exposures kept declining. Fidelity now permits the fund to own up to 10% in high-yield securities, but the managers haven’t used the flexibility, raising questions about how effectively the team takes advantage of Fidelity’s resources and capabilities.

Key Morningstar Metrics for Fidelity Advisor Short-Term Bond Fund Class Z

Morningstar Medalist Rating: Silver

Process Pillar: Average

People Pillar: Above Average

Parent Pillar: High