What are the managers of VUSTX thinking?

[rhymenocerous]

I know that this has been stated before, but I just looked up the stats of this fund myself to show a comparison with TLT for a friend of mine.

VUSTX holds 31 bonds with an average duration of 21.1 years. 60% of the bonds have maturities between 20-30 years, 25% have maturities between 10-20 years, and 11% have maturities between 1-3 years. Also, 85% of the bonds are issued by the Treasury, while 15% are Government Mortgage-Backed.

Compare this to iShare's TLT ETF. In that fund, 95% of the bonds have maturities 25+ years, and 5% are 20-25 years. Also, 99% of the bonds are from the Treasury, with no Government Mortgage-Backed bonds.

What is with VUSTX having 11% in bonds with 1-3 year maturities?!?

EDIT:
On closer inspection of the specific holdings, the 1-3 year maturity bonds seem to be part of a "TriParty Repurchase Agreement" with Merrill Lynch, JP Morgan, RBS Securities, and Barclays Capital.  This could have to do with securities lending instead.

[stone]

I guess they are wanting to maximise yield with minimal volatility. I suppose if you were just wanting to hold the fund on its own, then it would give you a better yield for a lower "capital at risk" or whatever than TLT would. Ofcourse, for the PP, we want that volatility so what they do is bad for PP use as you say.