Why This Municipal-Bond Fund Is a Topnotch Offering

Key Morningstar Metrics for Vanguard Intermediate-Term Tax-Exempt

• Morningstar Medalist Rating
  : Gold
• Process Pillar
  : Above Average
• People Pillar
  : Above Average
• Parent Pillar
  : High

Vanguard Intermediate-Term Tax-Exempt VWIUX combines experienced leadership with a disciplined approach that stands out and delivers consistently strong results versus muni-national intermediate Morningstar Category peers.

Deep muni market experience underpins the team’s stability and consistency. Industry veteran James D’Arcy has led this portfolio since 2013 and has contributed to the firm’s municipal franchise since 2011. The firm added Mathew Kiselak to the portfolio in late 2023 to bolster the management team’s depth. Kiselak has spent more than a decade at Vanguard and has comanaged several of the firm’s municipal offerings.

A sizable cast of analysts and traders enhances the managers’ abilities to uncover relative value opportunities and provide a durable edge over many category peers. The firm also continues to invest in quantitative tools, which have improved this team’s efficiency.

A disciplined process and low fees create a meaningful advantage over peers. The team builds a diversified, high-quality portfolio that aims for strong risk-adjusted results; it measures those outcomes against a custom benchmark that loosely reflects a higher-quality version of the Bloomberg Municipal 1–15 Year Index. D’Arcy incorporates guidance from senior leaders on the macro framework, which includes duration (a measure of interest rate sensitivity), sector outlook, and positioning. He works with sector experts to refine the approach through security selection and taps into a dedicated risk team for ongoing portfolio oversight. Instead of making outsize bets on individual names, the team focuses on thoughtful structural trades along the muni yield curve and relative value opportunities across sectors.

This structure gives the managers flexibility to adjust the portfolio when they see value. For example, they increased industrial development and pollution control revenue exposure as relative valuations improved in recent years. The December 2025 portfolio’s 14% stake stood roughly 3 percentage points higher than a year earlier.

The strategy has delivered compelling long-term absolute and volatility-adjusted returns. Over lead manager D’Arcy’s tenure from July 2013 through February 2026, the admiral shares’ 3.0% annualized gain beat more than 70% of muni-national intermediate category peers and the Bloomberg Municipal 1-15 Year index by 26 basis points. The strategy’s information ratio (a measure of excess return over excess standard deviation versus the benchmark) also ranked in the top decile during the same period.

The strategy’s bias to higher-quality bonds has helped it keep pace with peers in normal periods and hold up better during periods of credit stress. For example, the outperformance of below-investment-grade debt over investment-grade bonds led to slight underperformance versus peers in 2024. The fund’s 1.8% gain that year outpaced its index by 90 basis points but trailed the peer median’s 2.1% return. In 2020, the strategy had a strong year despite the muni market’s significant rebound after the first quarter’s pandemic-driven selloff; its 5.2% gain for the calendar year landed in the top quartile of distinct peers. In 2022 and 2023’s choppy markets, the strategy provided some protection and beat more than three-fourths and a half of peers, respectively. Strong security selection in industrial development and pollution control revenue bonds helped in 2022, and picks within general-obligation bonds, electric/gas, leasing, and special assessment supported stronger returns in 2023.

This fund remains one of the top active muni offerings and has served investors well over time.