14
Vanguard Announces Fee Cuts, Mergers
Vanguard announced an array of changes that
will make it cheaper to invest with the firm. It’s also
merging away five funds.
Vanguard Dividend Appreciation Index
VDAIX
will have new Admiral shares with a
0
.
10%
expense
ratio and a $
10
,
000
minimum investment. That’s a
welcome savings on a fund currently charging
0
.
20%
for the Investor share class. The Admiral shares will
be available in December.
At eight funds, Vanguard will rename Signal shares
as Admiral shares and lower the minimum invest-
ment to $
10
,
000
from $
100
,
000
. Seven of the eight
are bond-index funds, like
Vanguard Mortgage-
Backed Securities Index
VMBSX
. The eighth is
Vanguard Global ex-U.S. Real Estate Index
VGRLX
.
Vanguard plans to merge two of its tax-managed
funds into very similar index funds.
Vanguard Tax-
Managed International
VTMGX
will merge into
Vanguard Developed Markets Index
VDMAX
, and
Vanguard Tax-Managed Growth & Income
VTGLX
will merge into
Vanguard 500 Index
VFIAX
.
In both cases, the funds tracked the same index. We
rate all four Gold. It’s understandable that Vanguard
would make this change as it has become adept at
avoiding capital gains payouts in its index funds and
likely doesn’t need the added flexibility of the tax-
managed strategies.
A third merger features a combination of mediocre
actively managed large-growth funds.
Vanguard
Growth Equity
VGEQX
(not rated) will merge into
Vanguard U.S. Growth
VWUSX
(rated Neutral).
Vanguard Growth Equity won’t go down in the books
as a great success story. An investor who bought
when Vanguard adopted the fund in June
2000
would
be about
17%
in the red today. Vanguard U.S. Growth
will retain its subadvisors and add Jennison and
Baillie Gifford from Growth Equity. U.S. Growth has
Fund Manager Changes
Fund News
Artisan Mid Cap ARTMX
Impact: Negative 09-30-13
Andy Stephens is no longer the lead manager on this fund, but he remains team leader and is listed as a
comanager. Matt Kamm is now the lead manager. Stephens had been sole manager for the first four years
at this fund until another comanager, Jim Hamel, was promoted in 2001. Kamm, who joined the team as
an analyst in 2003 and became an associate manager in 2010, has contributed to strong stock selection
in health care over the years.
|
Our Take: Having Stephens dial down his contribution here is a negative,
although his continued involvement and Kamm’s experience give us confidence. Plus, Hamel is still on
board as are two other experienced comanagers. We are maintaining our Silver rating on this closed fund.
Artisan Small Cap Value ARTVX, Mid Cap Value ARTQX, and Value ARTLX
Impact: Negative 09-30-16
Scott Satterwhite, who comanages three Artisan Value funds, is set to retire in three years. Dan Kane was
promoted to comanager, joining Jim Keiffer and George Sertl as the trio that will run things when Satter-
white retires.
|
Our Take: While the loss of Satterwhite is a negative, he has a good team around him, and
Artisan certainly has plenty of lead time to prepare for his departure. We’re maintaining our ratings on the
funds.
Laudus US Large Cap Growth LGILX
Impact: Positive 10-04-13
Laudus has hired back former manager Lawrence Kemp. I wrote in last month’s Fund Manager Changes
that the fund had gotten a new comanager, but I was disappointed Laudus hadn’t followed Kemp to
BlackRock. Lo and behold, Laudus announced in October that it is moving the fund from subadvisor UBS to
BlackRock, Kemp’s new home.
|
Our Take: This is very good news for shareholders. We’re maintaining
the rating at Neutral because Kemp is still in the process of building his team at BlackRock, but the ingredi-
ents are there for a good fund down the road.
Meridian Growth MERDX
Impact: Positive 09-05-13
Former Janus managers Chad Meade and Brian Schaub were named to run this fund once Arrowpoint’s
acquisition of Meridian funds was completed. They replace interim managers Larry Cordisco and James
England, who had filled in for a year in the wake of Rick Aster’s death.
|
Our Take: This is a big upgrade and
brings welcome stability as the fund has been in limbo since Aster’s death. The pair did a brilliant job at
Janus Venture
JAVTX
and Janus Triton
JATTX
. I anticipate this fund to look a fair amount like Triton with
a concentrated portfolio of small- and mid-cap growth stocks. The fund has a modest $2.1 billion asset
base but that will likely grow with the new managers on board.
Vanguard International Growth VWIGX
Impact: Negative 10-30-13
Comanager Virginie Maisonneuve was hired away by PIMCO. She had been a comanager of this fund’s
Schroders-run sleeve since 2005. Schroder runs about one third of the fund, and Simon Webber, who has
been listed since 2009, will be the sole manager of the Schroder sleeve.
|
Our Take: Maisonneuve was the
second-most senior manager on the fund, so it’s a blow. However, as she was a comanager of only one third
of the fund, it’s far from a disaster. The other slices are run by experienced managers at Baillie Gifford and
M&G Investment Management. We are reviewing our rating, and I will send out an email alert when we
have published the new report.
Vanguard Primecap VPMCX and Vanguard Primecap Core VPCCX
Impact: Negative 12-31-13
Primecap co-founder Mitch Milias is going to step down from portfolio management duties at year-end.
|
Our Take: Considering he first managed money in 1967, it’s safe to assume Primecap saw this coming. We
are maintaining our Gold rating on the funds because Primecap has a very strong team that is not dependent
upon a single person.
