Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term.
The leading factor in the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, also influences the rating. Low expenses across its parent firm's funds, whose fees rank in the middle quintile of their respective category on average, strengthen the process as well. The pattern of low expenses at the firm indicates that it is focused on delivering strong results for investors.
The investment strategy as stated in the fund's prospectus is:
The investment seeks results that closely correspond, before fees and expenses, to the performance of the ICE U.S. Treasury 3-10 Year Bond Index. The fund seeks investment results that closely correspond, before fees and expenses, to the performance of the underlying index, which measures the performance of U.S. dollar-denominated, and fixed rate securities with minimum term to maturity greater than three years and less than or equal to ten years. The fund will invest at least 80% of its assets in securities included in the underlying index.
This strategy's 12-month yield is 4.0%, higher than its average peer's 3.5%. In addition, it has a 3.7% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). Higher yields tend to indicate higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated AA. In terms of long-term interest-rate risk, this strategy is on par with peers. The longer a strategy's duration, the more sensitive it is to shifts in interest rates. This fund, with a 5.0-year duration, is expected to gain 5.0% of its net asset value if interest rates drop by 1 percentage point, and vice versa.