https://www.sec.gov/Archives/edgar/data/1004655/000093247117004797/whitehallmergedsupps.htm497 1 whitehallmergedsupps.htm WHITEHALL 497E
Vanguard International ExplorerTM Fund
Supplement to the Prospectus and Summary Prospectus Dated February 23, 2017
Restructuring of the Investment Advisory Team
The board of trustees of Vanguard International Explorer Fund approved adding TimesSquare Capital Management, LLC (TimesSquare Capital) to the Fund’s investment advisory team.
Effective immediately, TimesSquare Capital will manage a portion of the Fund’s assets.
TimesSquare Capital and the Fund’s other investment advisors—Schroder Investment Management North America Inc. and Wellington Management Company LLP—each independently select and maintain a portfolio of common stocks for the Fund. The Fund’s board of trustees determines the proportion of the Fund’s assets to be managed by each advisor and may change these proportions at any time.
The Fund’s expense ratio, investment objective, principal investment strategies, and principal risks are not expected to change.
Prospectus and Summary Prospectus Text Changes
The following is added under the heading “Investment Advisors”:
TimesSquare Capital Management, LLC (TimesSquare Capital)
In the same section, the following is added to the list of Portfolio Managers:
Magnus S. Larsson, Senior Vice President and Portfolio Manager of TimesSquare Capital. He has managed a portion of the Fund since August 2017.
(over, please)
Prospectus Text Changes
The following is added to “Security Selection” section under More on the Fund:
TimesSquare Capital Management, LLC (TimesSquare Capital) employs a bottom-up investment process driven by fundamental equity growth research conducted by its investment analysts, with a particular emphasis on the assessment of management quality, an in-depth understanding of superior business models, and valuation discrepancies.
TimesSquare Capital invests the Fund’s assets in a diversified portfolio of stocks that it believes, based on its research, will generate superior risk-adjusted returns. TimesSquare Capital’s research process begins with a collaborative team of skilled and experienced analysts, which identify superior growth businesses with market capitalizations less than $5 billion at the time of purchase. Once a company is identified, rigorous fundamental analysis is performed, projected growth rate and return potential is calculated, and the company’s valuation is assessed on a relative and absolute basis. A company’s relative value is compared to industry peers, as well as firms with similar business models and at a similar point on the value chain. TimesSquare Capital’s sell decisions are based on the same research process, and securities would generally be sold when, among other things, there is no longer high conviction in the return potential of the investment, or when the advisor identifies a significantly more attractive investment candidate.
The following is added to the “Investment Advisors” section:
TimesSquare Capital Management, LLC, 7 Times Square, 42nd Floor, New York, New York 10036, is a registered investment advisor that specializes in small- and mid-cap growth equities. TimesSquare Capital’s institutional partner, Affiliated Managers Group, Inc. (AMG), a publicly traded global asset management company, indirectly holds a majority equity interest in TimesSquare Capital, with the remaining portion owned by TimesSquare Capital principals. As of June 30, 2017, TimesSquare Capital managed approximately $17.2 billion in assets for AMG funds, corporations, public funds, unions, endowments and foundations, retirement plans, and other institutional accounts.
In the same section, the following is added to the list of portfolio managers:
Magnus S. Larsson, Senior Vice President and Portfolio Manager at TimesSquare Capital. He has worked in investment management since 1995, has managed investment portfolios since 2000, has been with TimesSquare Capital since 2012, and has managed a portion of the Fund since August 2017. Education: B.S., B.A., University of Orebro, Sweden.
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PS 126A 082017....
Comments
Schroder is also a fine fit for this fund. It ran the fund well from its inception as Schroder International Smaller Companies (SSCIX) through 2002 when Vanguard acquired and rebranded it, until mid 2010 when Wellington was added as a manager.
I remain less than thrilled with Wellington's international management skills (as I've commented about before). VINEX did not fare particularly well in the first couple of years after the mid 2010 addition of Wellington. 2011 (90th percentile) and 2012 (68th percentile) were not good years, though it has generally done much better since (except last year).
If you want to get a purer view of how Wellington management has done with international small caps, you can look at HNSYX. It's been co-managed by Simon Thomas (who is the Wellington manager for VINEX) and Daniel Maguire (also of Wellington) since 2006. An okay fund, but not one that stands out.
Note that HSNYX was closed in 2016. It currently has $422M AUM. VINEX currently has $3.6B AUM, 29% of which (about $1B, i.e. over double the size of HSNYX) will continue to be managed by Wellington, at least for now.
Finally, I wonder whether the addition of TimesSquare Capital will accelerate VINEX's drift toward growth stocks. My vague recollection is that VINEX started out as a value fund. M* still classifies it as blend, though its portfolio drifted into growth three years ago, where it has remained.
Perhaps Vanguard will reduce Wellington's AUM and shift them to TimesSquare. The numbers suggest that would help improve the fund.