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The Vanguard Wellington Fund: The Most Legendary Mutual Fund Of All-time
I didn't know much about Mr. Bogle until I watched this interview. He sounds like a honest man - I'd trust him as a planner. A nice change from the usual in this business.
Is he no longer involved with Vanguard? If not, does he oversee any other mutual funds?
Reply to @VintageFreak: it was not it was not discovered already. This fund has one of the highest risk adjusted returns in its category. I would hang onto it over many of the funds mentioned recently. Get rid of your AQR fund and keep this one.
He is the founder and former chairman of Vanguard. He championed low fees for investors and in general favors index funds to achieve that but the culture he set at Vanguard has resulted in low fees for actively managed funds there as well. Vanguard is the only company in this business that the parent company is owned by the funds and on turn by fund investors.
For those that does not know, Wellington fund pre-dates Vanguard. Bogle used to be chairman of Wellington Asset Management company and after he was fired from Wellington he orchestrated a fund board takeover of the Wellington fund and other affiliated funds and that is how Wellington, Windsor etc. ended up in Vanguard's lineup afterwards. However, he did not cut ties with wellington asset management company. Wellington asset management does manage some Vanguard funds even today.
Wrong numbers, wrong inferences. (Still a great fund.)
According to the fund's prospectus (not "charter"), the fund invests 30% to 40% of its portfolio in bonds, not the 40% to 60% the writer claims.
The duration was 6.6 years in January (at least that was the duration stated in M*'s mid-January report), 6.23 years as of March 31 (again, per M*), and currently 6.0 (per Vanguard). Not too close to the writer's stated five years. M* goes further to suggest that the duration has been generally getting longer (not shorter as the writer asserts) because it tracks Barclay's index, which has been getting longer over the years.
The writer says the fund owns "top notch bonds", and that it is "filled with the highest quality bonds". But Vanguard itself characterizes the fund's average credit quality as only mid-grade (see the bond style box on Vanguard's site). In fact, once one tosses out the US government bonds (22% of the portfolio), nearly 4/5 of the portfolio is single A or below. (Even without tossing out those bonds, more than 3/5 is single A or below.) Investment grade, sure. Top notch, hardly. (Data as of 7/31 per Vanguard's site.)
Is it a good fund? Yes. Is it worth holding? Yes. (Both answers of course IMHO.) But is it the fund he's describing? Only superficially. So it's not surprising he thinks he can do better managing a portfolio himself.
(I believe he also gets the net return since inception wrong, since Wellington was initially a load fund, and he neglected to deduct that load. To quote John Bogle: "[D]uring almost all of Wellington's first half-century, its shares were distributed to investors by stockbrokers who were paid sales loads for their efforts, a system abandoned in 1977 when shares began to be offered directly to investors on a commission-free basis.")
Most people tried to talk you out of dropping the fund. Your take from what I read is that it is bond heavy and longer duration bond then you are comfortable with going forward. You believe it can't repeat it's stellar performance. I get that, but on the other hand you could be making a mistake trying to project future results. This fund is closed, so getting back in will be impossible. So what about keeping a toe-hold? Just for the "slight" possibility you could be wrong. As someone else said, dump the 'good story - but unproven' AQR fund instead.
Guess I wouldn't throw out one of the best mutual funds of all time, but I do see your side. I've been getting rid of a couple bond heavy allocation funds myself, PAUDX (I used the D for you ) and PGDPX.
Reply to @Investor: Nice post. I did not know that the Wellington/Windsor connection to Vanguard was consequence of the Bogle history you describe. Pretty cool. As for VWELX, one of greatest mutual funds ever. Though I suspect it too will spend some days in the doghouse.
Guys, a bird in hand is worth two in the bush. I have explained many times I have tax losses on the books. Yes, this is winner. Yes, I need to claim it. I'm not ruling buying it back or DCAing back in.
I'm just saying I think it will do worse before it does well now that this article is out. WHEN vs WHAT. That's my story, and I'm sticking to it. I don't see how people can fault me for being an "active" manager when I'm buying an "actively managed fund". I'm using the proceeds from my VWELX to buy more AUXFX and GRSPX. Funds I already own. Now no one an tell me over next 10 years these will not do equally well.
Wellington is still open, unless you're trying to get in via a broker, advisor, or institution.
From the prospectus supplement (2/28/13): "Vanguard Wellington Fund will be closed to all prospective financial advisory, institutional, and intermediary clients (other than clients who invest through a Vanguard brokerage account)."
If one checks Vanguard's page for this fund, one will see the min investment is $3K (i.e. not closed). In contrast, the Primecap page says: Minimum investment: closed.
Reply to @msf: Thanks msf. My mistake. Not available within my 401k TRP brokerage account. When I made an inquisitory buy attempt, it said closed to new accounts.
Comments
I think history is on my side. Now that everyone knows about this fund, it is curtains...
Is he no longer involved with Vanguard? If not, does he oversee any other mutual funds?
Thanks in advance.
Are you talking about John Bogle?
He is the founder and former chairman of Vanguard. He championed low fees for investors and in general favors index funds to achieve that but the culture he set at Vanguard has resulted in low fees for actively managed funds there as well. Vanguard is the only company in this business that the parent company is owned by the funds and on turn by fund investors.
http://en.m.wikipedia.org/wiki/John_Bogle
https://personal.vanguard.com/bogle_site/bogle_bio.html
There is even a board named after him:
Bogleheads: http://www.bogleheads.org
For those that does not know, Wellington fund pre-dates Vanguard. Bogle used to be chairman of Wellington Asset Management company and after he was fired from Wellington he orchestrated a fund board takeover of the Wellington fund and other affiliated funds and that is how Wellington, Windsor etc. ended up in Vanguard's lineup afterwards. However, he did not cut ties with wellington asset management company. Wellington asset management does manage some Vanguard funds even today.
You can read about the details here:
http://money.cnn.com/magazines/fortune/fortune_archive/2003/01/20/335617/index.htm
According to the fund's prospectus (not "charter"), the fund invests 30% to 40% of its portfolio in bonds, not the 40% to 60% the writer claims.
The duration was 6.6 years in January (at least that was the duration stated in M*'s mid-January report), 6.23 years as of March 31 (again, per M*), and currently 6.0 (per Vanguard). Not too close to the writer's stated five years. M* goes further to suggest that the duration has been generally getting longer (not shorter as the writer asserts) because it tracks Barclay's index, which has been getting longer over the years.
The writer says the fund owns "top notch bonds", and that it is "filled with the highest quality bonds". But Vanguard itself characterizes the fund's average credit quality as only mid-grade (see the bond style box on Vanguard's site). In fact, once one tosses out the US government bonds (22% of the portfolio), nearly 4/5 of the portfolio is single A or below. (Even without tossing out those bonds, more than 3/5 is single A or below.) Investment grade, sure. Top notch, hardly. (Data as of 7/31 per Vanguard's site.)
Is it a good fund? Yes. Is it worth holding? Yes. (Both answers of course IMHO.) But is it the fund he's describing? Only superficially. So it's not surprising he thinks he can do better managing a portfolio himself.
(I believe he also gets the net return since inception wrong, since Wellington was initially a load fund, and he neglected to deduct that load. To quote John Bogle: "[D]uring almost all of Wellington's first half-century, its shares were distributed to investors by stockbrokers who were paid sales loads for their efforts, a system abandoned in 1977 when shares began to be offered directly to investors on a commission-free basis.")
http://www.mutualfundobserver.com/discussions-3/#/discussion/7217/vanguard-wellington
Most people tried to talk you out of dropping the fund. Your take from what I read is that it is bond heavy and longer duration bond then you are comfortable with going forward. You believe it can't repeat it's stellar performance. I get that, but on the other hand you could be making a mistake trying to project future results. This fund is closed, so getting back in will be impossible. So what about keeping a toe-hold? Just for the "slight" possibility you could be wrong. As someone else said, dump the 'good story - but unproven' AQR fund instead.
Guess I wouldn't throw out one of the best mutual funds of all time, but I do see your side. I've been getting rid of a couple bond heavy allocation funds myself, PAUDX (I used the D for you
I'm just saying I think it will do worse before it does well now that this article is out. WHEN vs WHAT. That's my story, and I'm sticking to it. I don't see how people can fault me for being an "active" manager when I'm buying an "actively managed fund". I'm using the proceeds from my VWELX to buy more AUXFX and GRSPX. Funds I already own. Now no one an tell me over next 10 years these will not do equally well.
Wellington is still open, unless you're trying to get in via a broker, advisor, or institution.
From the prospectus supplement (2/28/13): "Vanguard Wellington Fund will be closed to all prospective financial advisory, institutional, and intermediary clients (other than clients who invest through a Vanguard brokerage account)."
If one checks Vanguard's page for this fund, one will see the min investment is $3K (i.e. not closed). In contrast, the Primecap page says: Minimum investment: closed.