Vanguard’s efforts to enhance its active equity options for Personal Advisor Services clients took an important step with the Aug. 26 filing of registration statements for three high-conviction mutual funds set to debut in late 2021. Although new, each strategy builds on either an existing or prior Vanguard offering and uses proven investors from two of Vanguard’s most trusted subadvisors.
Donald Kilbride of Wellington Management will run Vanguard Advice Select Dividend Growth. It is a more concentrated version of the strategy he has used to great effect on Vanguard Dividend Growth (VDIGX) since early 2006.
David Palmer, also of Wellington Management, will oversee the multi-cap Vanguard Advice Select Global Value. Palmer has led Wellington’s 70% slice of Vanguard Windsor (VWNDX) since 2019, but he is more experienced than that start date suggests. He began covering energy stocks for Vanguard Windsor in 1998 and ran a portion of the multi-cap domestic offering Vanguard Capital Value from late 2009 to mid-2016, when he took over the whole and built a strong, if volatile, record until its July 2020 merger with Vanguard Windsor.
James Anderson and Lawrence Burns of Baillie Gifford will comanage Vanguard Advice Select International Growth. Both managers are part of the Baillie Gifford team running 70% of Vanguard International Growth (VWIGX). They invest with a venture capital mindset, looking for the few companies that will achieve immense growth with the understanding that many ideas may fizzle out.
At 40 to 45 basis points per year, each fund is attractively priced compared with most active options, though more expensive than some Vanguard siblings. Vanguard Dividend Growth, for example, is 19 basis points cheaper than Vanguard Advice Select Dividend Growth’s 45-basis-point annual charge. 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. Kilbride has run an institutional version of this concentrated strategy since early 2008. Through July, its 13.7% annualized gross-of-fees gain beat Vanguard Dividend Growth by nearly 2 percentage points, albeit with greater volatility.
Vanguard’s PAS business plans to pair these three new funds with two current ones, Vanguard Capital Opportunity (VHCAX), subadvised by Primecap Management, and Vanguard International Core Stock (VZICX), run by Kenneth Abrams and F. Halsey Morris of Wellington. 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. Either way, investors will benefit from getting advice about how best to use them along the way.