Barron's on Active Share & James Anderson/VWILX

yogibearbull

In the current Barron's, there are a couple of stories on funds. Barron's links may require subscriptions; open Summaries are from here, LINK

@LewisBraham has a piece on active-shares.
FUNDS. ACTIVE-SHARE has become popular since 2009 introduction by CREMERS and a colleague. But higher fees by funds using active-shares have not been justified by their risk-adjusted performance (some just took higher risks). It may work better for large-cap funds than small- or mid- cap funds. High active-share doesn’t mean better manager skills. It may be useful for avoiding closet indexers that charge high fees; focused funds also have high active-shares but have higher volatility and inconsistent performance. https://www.barrons.com/articles/for-active-funds-being-different-from-the-index-isnt-enough-51650525302?mod=past_editions

Another piece on funds is an interview by James Anderson, the retiring manager of VWIGX / VWILX.
James ANDERSON, Baillie Anderson (Retiring as Partner in April), former Barron’s Roundtable Member. It has been a tough 2022/Q1 but his growth style has been great during his 39 year career and he remains optimistic on transformative technologies (e.g. data + genomics in healthcare (ILMN, RXRX, Tempus, etc), synthetic biology, electrification, etc). Trick is to find a handful of companies in the new areas as many old and new companies will be left behind. Realize that transformative technologies are deflationary or disinflationary, so with high inflation now, other influences are dominating, and he is concerned about those. But one has to respect the market – e.g. both Tesla/TSLA (he thought MUSK had his hands full with Tesla and SpaceX and he is puzzled by this Twitter/TWTR thing that he sold long ago) and Moderna/MRNA have great futures ahead but the market is treating them quite differently. He likes BEZOS’/AMZN approach of going for 10% chances of making 100x than BUFFETT’s of never losing money. https://www.barrons.com/articles/james-anderson-baillie-gifford-tesla-illumina-moderna-stock-51650585145?mod=past_editions

Observant1

@yogibearbull,

Thanks for the James Anderson interview summary.
Mr. Anderson has been very influential at Baillie Gifford.
Funds that he has been involved with have generated excellent long-term returns.
I'm a VWILX ¹ investor and the fund has performed poorly over the past year and YTD.
However, performance has been top-decile over the trailing 5 Yr, 10 Yr, and 15 Yr periods.
So it goes...



¹ Baillie Gifford manages ~65%; Schroder manages ~34%

Observant1

Active Share measures how a fund's portfolio differs from a relevant benchmark index.
Higher Active Share scores denote more divergence between the two.
This is fine as far as it goes.
However, the creators of Active Share claimed that it predicted fund performance:
"Active Share predicts fund performance: funds with the highest Active Share significantly outperform their benchmarks, both before and after expenses, and they exhibit strong performance persistence." Link
This assertion has since been proven false.
John Rekenthaler from M* had a good article about Active Share last year.

Sven

I'm a VWILX ¹ investor and the fund has performed poorly over the past year and YTD.

Same here, but I exchanged most of VWILX to the more value-oriented VGWEX for reducing risk. Growth is out of favor now after it out-performed value for many years. Anderson is retiring this year. Perhaps the Schroeder team will now lead VWILX.

Observant1

You're right that growth is out of favor now.
James Anderson will retire on April 30.
Current Baillie Gifford managers Tom Coutts and Lawrence Burns will continue to manage VWILX.
You mentioned VGWEX which I could not find.
Did you mean VHGEX?

Sven

My mistake, it is VGWLX, Global Wellington. A global version of Wellington.

Wellington also manages International Core Stock fund, VWICX. I reduced my EM and growth exposure in late 2020 as part of risk reduction. Now bonds are falling as well.

Observant1

VGWAX is a good fund which I did previously consider.
However, I have a strong preference for holding separate stock and bond funds.

I also looked at VZICX shortly after it became available.
Wellington is a great investment firm but the VZICX lead manager didn't seem
to have much relevant experience with international equities.

That was a good move reducing EM and growth in late 2020!
Unfortunately, it appears that bonds may continue to decline for a while...

Sven

Several experienced Wellington managers retired in the last 5 years. But Wellington have deep bench where newer managers typically have more than 5 years severing as co-managers in similar funds. Wellington is also advisors to Hartford funds and you can find the track record of these managers. Google their names and trace their prior track record.

I pick VGWAX since the bond manager has long track record whereas the stock manager has several years experience running two Hartford funds. The oversea exposure is limited to developed market. Through 2020 till now, the downside risk is better than average. Also I want a global allocation fund for lowering the risk.

Observant1

Investors can also use the old M* site to view other mutual funds associated with a manager. Link

The VGWAX equity manager, Nataliya Kofman, worked alongside Edward Bousa (long-time VWENX manager) on a separately managed account using the same investment approach. From M*:
"The equity sleeve has a long, solid record.
It is a duplicate of Wellington Global Quality Equity (a separately managed account),
whose annualized return of 12.9% since its 2009 inception beats the FTSE Developed Index's 11.7%.
This is notable given the strategy’s value tilt, which has been a headwind in the multiyear growth-led market."

Sven

Really good find to learn more about Ms Kofman from M* (forgot the old M*). She also manages Hartford Dividend and Quality Values funds. The track record is quite good.