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Vanguard Advice Select funds in registration

https://www.sec.gov/Archives/edgar/data/1004655/000168386321004663/f9509d1.htm


Admiral Class:
Vanguard Advice Select Dividend Growth Fund
Vanguard Advice Select International Growth Fund
Vanguard Advice Select Global Value Fund

Comments

  • edited August 26
    These new actively managed funds will be available exclusively to clients of Personal Advisor Services (PAS).
    Vanguard Advice Select Dividend Growth Fund will seek to outperform the broader U.S. market, focusing on financially sound, large-cap companies across a diverse range of sectors that have prospects for long-term total returns, as a result of their ability to grow earnings and their willingness to increase dividends over time. A more concentrated version of the strategy used in Vanguard Dividend Growth Fund, the fund will be managed by Wellington Management Company LLP and will have an estimated expense ratio of 0.45%, compared with the average expense ratio for large-cap core funds of 0.90%.3

    Vanguard Advice Select Global Value Fund will provide global, all-cap, contrarian-value exposure by investing in discounted companies that are being avoided or overlooked. The fund will be managed by Wellington Management Company LLP and will have an estimated expense ratio of 0.40%, compared with the average expense ratio for global multi-cap value funds of 1.10%.4

    Vanguard Advice Select International Growth Fund will employ a bottom-up equity strategy—analyzing the fundamentals of specific companies instead of broad sectors or industries—focused on exceptional international growth companies. The fund will be managed by Baillie Gifford Overseas Ltd., as a more concentrated version of the strategy used in Vanguard International Growth Fund. The fund will have an estimated expense ratio of 0.42%, compared with the average expense ratio for international large-cap growth funds of 1.13%.5
    https://tiogapublishing.com/news/state/vanguard-personal-advisor-services-to-introduce-three-active-equity-funds/article_71cdffb1-e09e-50db-a7f0-6241876473e0.html

    From an initial glance, the Select Dividend Growth Fund will be a clone of Dividend Growth fund with the same fund manager.

    Global Value Fund is new but it is managed by Wellington. This fund is likely to be similar to Global Wellington but without the bond components.

    Select International Growth Fund is different from Vanguard International Growth. This new fund will be solely managed by Baillie Gifford, not the co-managing team consisting of BG and Schroeder.

  • It will be interesting what value-add these funds will provde to PAS members other than bragging rights for having access to 'exclusive' funds.....
  • The third fund may be of interest to people trying get access to Baillie Gifford without being "impeded" by another management firm. (VWIGX is 70% managed by Baillie Gifford and 30% by Schroders.)

    Details, details ...

    The PR piece says that "The funds will be made available for PAS clients investing through their advised portfolios." In contrast, the prospectus says that "Admiral Shares are generally available only to clients enrolled in Vanguard Personal Advisory Services® (PAS) ... You may purchase or redeem shares online through our website (vanguard.com)"

    These seem contradictory. PAS clients cannot invest online in their advised portfolios. They can only invest online in separate, self-managed accounts. Will PAS clients be able to trade these funds in self-managed accounts?

    ---

    The PR piece refers to "five single-manager funds". Some of these funds have multiple managers, though all employed by a single investment management firm.

    The international fund will be co-managed by Anderson and Burns, but not by Coutts. That in itself is weird, since Burns was just added as a manager to VWIGX at the end of last year and Anderson will be leaving next year.

    Likewise, VHCOX (another of the "single-manager funds") is team managed, by five managers from Primecap.

    ---
    "funds' concentrated, higher-alpha strategies"

    This is not your father's Vanguard.
  • Thanks for digging further for the details. These funds are for customers in Vanguard’s service and not for retail customers. International Growth is interesting. Anderson is retiring within a year and leaving the fund to a much less seasoned manager. Not sure that is a good situation for BG concentrated strategy.
  • "This is not your father's Vanguard." How sad !
    Derf
  • edited August 27
    Vanguard Advice Select Dividend Growth will be managed by Donald Kilbride of Wellington.
    This fund will be a more concentrated version of Vanguard Dividend Growth which Mr. Kilbride has managed since 2006.

    Vanguard Advice Select International Growth will be comanaged by James Anderson* and Lawrence Burns. Both managers are part of the Baillie Gifford team which runs 70% of Vanguard International Growth.
    Baillie Gifford invests with a venture capital approach which has generated high returns along with high volatility.

    *Mr. Anderson will leave Baillie Gifford in April 2022 after nearly four decades with the firm.

    Link
  • A couple of curious speculations from M*:

    the higher levy [higher ER on Select Div Growth vs. VDIGX] also likely reflects Vanguard Advice Select Dividend Growth's greater return potential.

    Vanguard says that it prices funds at cost. M* is speculating that Vanguard is setting a higher price based on something other than cost. Higher return potential => higher demand => higher price?

    ---

    Together, these five funds provide a high-reward, high-risk allocation either to add to a core of index funds or to be used on their own for those with the greatest appetite for risk

    Vanguard (in its PR piece) says:
    The active equity offer will primarily serve as a complementary allocation ... an ideal fit for PAS clients with sufficient risk tolerance and patience for active exposure as they can materially impact portfolio performance even at a relatively small allocation.
    ISTM that M* is reading too much into the qualifier "primarily". Especially since Vanguard is saying that the only clients that will have even a small portion of their portfolio invested in these funds are those with "sufficient" (read: high) risk tolerance. Of course we're all just reading tea leaves.
  • Would not limiting these to PAS only clients limit AUM, somewhat requiring higher ER - i.e., lack of scale. May be Vanguard will eventually make these funds available to retail clients as it continues to push into the active investing.
  • Yes, a smaller asset base might result in a higher ER, but M*'s speculation was that the higher fee was also due to its higher return potential.

    The full sentence reads: "Its fees are likely to come down as assets scale, but the higher levy also likely reflects Vanguard Advice Select Dividend Growth's greater return potential. "

    Also, given the fact that this fund is just pruning an already concentrated portfolio of about 40 stocks in VDIGX down somewhat, the cost of this incremental effort would seem to be minuscule. So I'm not even sure that a small asset base would necessarily entail significantly higher costs.

    Given that VDIGX has already closed in the past, and a concentrated version of it would tend to have more stringent capacity limits, I don't see the Advice Select sibling being offered generally. In fact, when VDIGX closed, it was a very hard close. Unlike funds like Primecap (VPMCX), Vanguard didn't let even Flagship customers open new VDIGX accounts when the fund was closed.

    Compare, VDIGX closing:
    Vanguard Dividend Growth Fund is closed to all new investors (with the exception of (1) investors who are added and invest in the Fund only through technology-driven model portfolios and (2) participants who invest in the Fund only through defined contribution plans that offer the Fund as an existing option).
    with VPMCX closing:
    New or current Vanguard PRIMECAP Fund (the Fund) shareholders may not open new accounts or contribute to existing Fund accounts, except as described in this supplement. Clients enrolled in Flagship Services™ and Vanguard Asset Management Services™ may open new Fund accounts, investing up to $25,000 per year as described ...
  • Here's a deeper dive into Vanguard's three new active equity funds for PAS clients.
    Link
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