(PUB) Vanguard Advisor

TAXES Managing Tax-Managed Funds

IT TOOK ALMOST 20 YEARS, but Vanguard has finally come to the con- clusion that I reached years ago: Some of its Tax-Managed funds have out- lived their usefulness. April saw Tax- Managed International bite the dust (though its record lives on in the reor- ganized Developed Markets Index ), and May will see the shuttering of Admiral Tax-Managed Growth & Income . Because of the convoluted manner in which the international fund was closed, I wanted to make it crystal clear why ticker symbols and fund numbers have changed on Developed Markets Index, the surviving entity. In essence, Tax-Managed International becameDevelopedMarkets Index through a merger of the two funds. But rather than merge the Tax-Managed International assets into Developed Markets Index, Vanguard did the reverse, and then the combined fund was renamed. Importantly, because Admiral Tax- Managed International was born in Aug. 1999, about nine months before the original Developed Markets Index, the “new” Developed Markets Index’s Admiral shares now have a longer track record than they used to. And that longer track record actu-

In With the Old, Out With the New

Fund No.

Ticker VDMIX VDVIX

Inception May 2000 Dec. 2013

OLD Developed Markets Index NEW Developed Markets Index

227

1397 5227

OLD Admiral Developed Markets Index NEW Admiral Developed Markets Index

VDMAX Sept. 2011 VTMGX Aug. 1999

127

aging all of its index funds, the Tax- Managed funds had limited utility. With high minimums and back-end loads, they were more a good marketing gim- mick than anything else. I would think that, over time, Vanguard will also find ways to delete its other Tax-Managed funds (though

ally makes the fund look a little better than it did. The original Developed Markets Index’s “since inception” return through March 2014 was an annualized 3.7%. Now, Admiral Developed Markets Index (the old- est share class for the fund) sports a since-inception return through March of 4.4%. In the coming weeks, Vanguard will be merging Admiral Tax-Managed Growth & Income out of existence as well, but the shift will be a bit simpler. That fund and its institutional sibling will simply disappear, and their assets will be absorbed by Admiral 500 Index . The 500 fund’s ticker symbol, fund number and track record will remain as they are. The bottom line is that the Tax- Managed fund’s premise might have been a good one for firms other than Vanguard, but because Vanguard was already incredibly tax efficient in man-

Developed Markets’ Admiral shares now

Tax-Managed Balanced is somewhat unique in its structure and could stick around). But given that it took two decades to finally part with two of its Tax-Managed options, I wouldn’t hold my breath. n have a longer track record than they used to, which makes the fund look better than it did.

PERFORMANCE U.S. Growth Emerging?

helped the fund emerge from a chal- lenging stretch and begin to deliver the type of competitive performance results that have characterized it for many of its 55 years,” he writes. “We are grate- ful to William Blair for its service to Vanguard shareholders.” Here’s my question:What emergence, and how much did William Blair con- tribute? Here are the facts as I see them. William Blair was initially hired to run between 25% and 30% of U.S. Growth’s

I’M ALWAYS A BIT BAFFLED when Vanguard, which doesn’t break out indi- vidual manager performance on any of its multi-managed funds, makes a point of singling out one of its managers for just about anything—particularly meet- ing a milestone on a millstone of a fund. Case in point: Chairman Bill McNabb’s shout-out to the team at William Blair & Co. for reaching its 10th anniversary as a portfolio manager on U.S. Growth . “William Blair has

portfolio. Initially, James Barber, John Jostrand and Norbert Truderung were the named portfolio managers. Over time, the William Blair team has morphed, and current managers James Golan and David Ricci became the lead managers in 2010 and 2011. Golan and Ricci also run William Blair Large Cap Growth fund, a fund that Golan has been on for years. So given McNabb’s niceties, I fig- ured I’d take a look at just how well

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