Vanguard US government bond fund tracking error

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Vanguard US government bond fund tracking error measures Vanguard's investment management performance.

Tracking error is one means of measuring active manager performance against an appropriate market index. Vanguard's U.S. government bond funds are actively managed, defined asset class funds. The funds include three nominal treasury bond funds, structured across three bond maturity levels: short, intermediate, and long term bonds; an inflation protected securities fund, investing in real return bonds, and a GNMA fund, which invests in full faith and credit government backed mortgage securities.

Tracking error

Table 1. provides long term average tracking errors for Vanguard's U.S. government bond funds. Data extends from 1993 to present for the Short, Intermediate, and Long term Treasury fund investor shares (which began the first full year of operations in 1992). Admiral share class data covers the period from 2002 (the first full year of operations of the share class) to the present. For the Inflation Protected Securities fund, data extends from the first full year of operations (2001 investor shares/ 2006 admiral shares) to present. The funds' historical yearly tracking errors are larger than the yearly tracking errors of bond index funds, although, historically, over longer holding periods, the funds have provided tracking errors virtually matching their expense ratios. Detailed annual tracking error data, along with additional statistical measurement of fund returns, are provided in the footnote tables.


Table 1. Vanguard US Government Fund Tracking Errors (compound total return) [1]
Fund Investor shares Admiral shares
Year Tracking Error Year Tracking Error
Vanguard Short Term Treasury Fund [note 1]
Investor Admiral
1993-2014 -0.27% 2002-2014 -0.08%
Vanguard Intermediate Term Treasury Fund [note 2]
Investor Admiral
1993-2014 -0.31% 2002-2014 -0.19%
Vanguard Inflation Protected Securities Fund [note 3]
Investor Admiral
2001-2014 -0.22% 2006-2014 -0.11%
Vanguard GNMA Fund [note 4]
Investor Admiral
1993-2014 -0.07% 2002-2014 +0.09%
Vanguard Long Term Treasury Fund [note 5]
Investor Admiral
1993-2014 -0.23% 2002-2014 -0.07%


The relative performance of investor and admiral share classes can be best illustrated by viewing performance over a common holding period. The following table examines the average tracking error performance of each fund over the period beginning with the first full year of admiral share performance to the present. The lower expense admiral shares provide for lower tracking errors to benchmark performance. [note 6]

Table 2. Vanguard US Government Fund Investor/Admiral share Tracking Errors
Fund Years Investor share
tracking error
Admiral share
tracking error
Vanguard Short Term Treasury Fund 2002-2014 -0.24% -0.12%
Vanguard Intermediate Term Treasury Fund 2002-2014 -0.49% -0.42%
Vanguard Inflation Protected Securities Fund 2006-2014 -0.21% -0.11%
Vanguard GNMA Fund 2002-2012 0.00% +0.10%
Vanguard Long Term Treasury Fund 2002-2014 -0.28% -0.10%

Notes

  1. Table 3.
    Vanguard Short Term Treasury Fund

    (View Google Spreadsheet in browser, then File --> Download as to download the file.)
  2. Table 4.
    Vanguard Intermediate Term Treasury Fund

    (View Google Spreadsheet in browser, then File --> Download as to download the file.)
  3. Table 5.
    Vanguard Inflation Protected Securities Fund

    (View Google Spreadsheet in browser, then File --> Download as to download the file.)
  4. Table 6.
    Vanguard GNMA Fund

    (View Google Spreadsheet in browser, then File --> Download as to download the file.)
  5. Table 7.
    Vanguard Long Term Treasury Fund

    (View Google Spreadsheet in browser, then File --> Download as to download the file.)
  6. Admiral shares of U.S. government bond funds require a $50,000 minimum investment.

References

  1. All return data for this and all other tables is derived from the Vanguard website, individual fund pages.