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Concentrated Ownership of Mutual Funds...is their a list?

beebee
edited February 2017 in Fund Discussions
In another thread with @VintageFreak, I opined over a dog of a fund, VWUSX. I commented that this fund experienced a "very rough patch" in the early 2000's. It held a FundAlarm rating of "3-Alarms" for many years after its tumble. At the time of VWUSX implosion I noticed VGSTX, Vanguard Star (a fund of funds) had taken on a large stake in VWUSX.

At present, VGSTX owns about 16% of VWUSX. I would call that a concentrated owner. M* does a good job of listing the concentrated owners of stocks and ETFs (individuals, mutual funds and institutions), but when it comes to mutual funds there is nothing mentioned as to ownership (who are the concentrated owners of the fund). If this were to be attempted I would further hope all share classes (of the fund) be collectively represented as one fund for ownership purposes.

Can a mutual fund owner find information on who the concentrated owners of a mutual fund are?

Comments

  • David_Snowball
    Hi, bee.

    Yes and no. The information is listed in the fund's statement of additional information but in 90% of the cases the listing is Schwab or some other brokerage.

    In the case of US Growth, the listing is:

    As of November 30, 2016, the following owned of record 5% or more of the outstanding shares of each class (other than ETF Shares):

    Vanguard U.S. Growth Fund—Investor Shares:
    Vanguard STAR® Fund, Valley Forge, PA (30.78%),
    Vanguard Fiduciary Trust Company, Valley Forge, PA (14.96%),
    Vanguard Diversified Equity Fund, Valley Forge, PA (5.26%)

    Vanguard U.S. Growth Fund—Admiral Shares:
    Vanguard Fiduciary Trust Company, Valley Forge, PA (14.41%),
    TIAA-CREF Trust Company, St. Louis, MO (5.09%)

    David
  • beebee
    edited February 2017
    Thanks @David_Snowball, so if my 4th grade math teacher ask me quickly how much of VGSTX is owned by these concentrated owners (5% or greater owners) I would quickly guess...about 70%. Wow! The two mutual funds, (VGSTX and VDEQX), own over a third (36.04%). Double wow!!

    Is this investment brilliance or nepotism?





  • VintageFreakVintageFreak
    @bee lot of fund companies have asset allocation funds that distribute money between their other actively managed funds. I don't this this is an issue. However, chosing your worst growth fund for the sleeve of your asset allocation fund is.

    I had owned STAR at one time and was considering buying it again. About that time I heard it would own US Growth and because of it I dropped the idea.
  • msf
    @bee you may be good at 4th degree arithmetic, but are you smarter than a 5th grader?

    Admiral shares represent about 45% of the fund's portfolio, and Investor shares about 55% (there are no ETF shares for this non-index Vanguard fund). Fractions come from net assets by share class reported in the annual statement.

    So you need to take 51% of Investor shares and multiply by 55%, to get 28% of the fund's total AUM.
    Then take 19.5% of Admiral shares and multiply by 45% to get about 9%.

    The total portion of the portfolio owned by Vanguard funds is thus about 37%.
  • beebee
    edited February 2017
    @msf, Thanks for clarifying. My apologizes to you and all 5th grade teachers. You are correct. As I mentioned, above, the number of share classes can complicate the math a bit. In this case, I got completely tripped up with merely two. Thanks for fact checking.

    So, more accurately, over 1/3 (about 37%) of VWUSX has 5 concentrated owners. To me, this kind of concentrated ownership has consequences for the fund (and individual shareholders). In the case VWUSX, I would call this ownership a "safe harbor strategy" by Vanguard for the leaking VWUSX ship. I would like Vanguard to explain their thinking here for the sake of individual investors (shareholders) of both (VGSTX) and (VWUSX).

    My point is that mutual funds with concentrated ownership have unique issues. For instance, how is Proxy voting handled? As concentrated owners, do the fund managers of VGSTX pass through the 15.7% voting rights of VWUSX to VGSTX shareholders or do these proxy votes remain in the hands of concentrated owners?
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