The Independent Adviser for Vanguard Investors
•
August 2014
•
13
FOR CUSTOMER SERVICE, PLEASE CALL
800-211-7641
Vanguard’s disclosures, none of the
numbers you’ll see here include
Vanguard’s three taxable money mar-
ket funds, because the last time that
data was updated was late 2013 and
the numbers disclosed dealt with 2012
ownership. (I should note, by the
way, that this doesn’t change things a
lot, since only five of Vanguard’s 11
directors owned shares in one or more
taxable money funds.) Also missing is
data on
Explorer Value
, for much the
same reason. As of the end of 2012,
there were no director shareholders in
that fund.
Spreading the Wealth?
So, what do the numbers tell us
about how Vanguard’s directors invest-
ed their Vanguard money in 2013? First
off, it’s probably not a big surprise
that the directors have focused their
own money on index funds—not active
funds. Oh, yes, certain board members
own certain active funds, but there’s
little consensus. And that means lots
of Vanguard shareholders who own
Vanguard’s active funds do so without
any director actually sitting at the table
with us, eating that active cooking.
Overall, just 54 funds count one or
more board members as shareholders,
leaving about 100 without any board
representation among shareholders.
The bulk of the directors’ money is
concentrated in just a few funds. Ten
of the 11 board members reporting
for 2013 own shares in
Total Stock
Market
, and seven own shares in
Total
International Index
. Six are share-
holders at
Emerging Markets Index
,
Intermediate-Term Tax-Exempt
and
SmallCap Index
. Remember that
these board members are wealthy, so
rather than invest in the taxable
Total
Bond Market
, they’ve chosen a tax-
exempt fund with a similar interme-
diate-term maturity. But after these
funds, the consensus begins to fall
apart, as the list on page 12 shows.
The only actively managed equity fund
to find even four board members as
investors is
PRIMECAP Core
, and
the active, balanced
Wellington
is also
owned by four.
You may recall that I told you earlier
this year that there were a couple of
notable changes in some of the direc-
tors’ holdings, revealed as new disclo-
sures were made. The big one, in my
view, was the 2013 investment of more
than $100,000 in
Capital Opportunity
by Chairman Bill McNabb. Why he
waited until 2013 is beyond me, but
he’s had a good ride so far in 2014,
with the fund up 7.8% through July.
McNabb also made new investments
in
Emerging Markets Select Stock
and
Total World Stock Index
. And
he added money back into Total Stock
Market after having apparently sold the
bulk of his holdings in 2012.
So, how are Vanguard’s directors’
portfolios stacking up? Well, if you
view this from 30,000 feet up, you
might say that a board with invest-
ments in more than 50 funds isn’t mak-
ing too terrible a showing. But consider
that we really don’t know how big a
commitment the directors have made,
since the required disclosures are so
minimal.
I’ll give the directors as a group
credit for owning more active equity
funds than they don’t own. But own-
ership is scattered about—so there’s
probably no consensus on perfor-
mance (or lack thereof) or on my bone
of contention with the multimanager
strategy that has, with minor excep-
tions, made many of Vanguard’s
Directors’ Commitment to Vanguard Funds
Total Funds
Owned Over $100,000 $50,001–100,000 $10,001–50,000
$1–10,000
Volanakis
22
21
0
1
0
McNabb*
22
20
1
1
0
Heisen
18
14
1
3
0
Gutmann
16
13
2
1
0
Rankin
12
11
1
0
0
Malpass
11
6
2
3
0
Gupta
9
9
0
0
0
Loughrey
8
7
1
0
0
Fullwood
8
6
1
1
0
Loughridge
7
7
0
0
0
Perold
2
1
0
1
2
*Vanguard Chairman.
Note: Indicates all funds reportedly owned at the end of 2013. As of July 31, 2014, 2013 director holdings had not been disclosed for three
taxable money market funds and Explorer Value.
Directors’ Direct Holdings
Peter F. Volanakis
Minimum invested
$2.1 million
No. of funds owned
22
Fees paid
$1.0 million
F. William McNabb III
Minimum invested
$2.1 million
No. of funds owned
22
Fees paid
N.A.
JoAnn Heffernan Heisen
Minimum invested
$1.5 million
No. of funds owned
18
Fees paid
$2.2 million
Amy Gutmann
Minimum invested
$1.4 million
No. of funds owned
16
Fees paid
$1.4 million
Rajiv L. Gupta
Minimum invested
$900,000
No. of funds owned
9
Fees paid
$1.9 million
F. Joseph Loughrey
Minimum invested
$750,000
No. of funds owned
8
Fees paid
$901,000
Alfred M. Rankin
Minimum invested
$750,000
No. of funds owned
8
Fees paid
$2.7 million
Scott C. Malpass
Minimum invested
$730,000
No. of funds owned
11
Fees paid
$394,000
Mark Loughridge
Minimum invested
$700,000
No. of funds owned
7
Fees paid
$382,000
Emerson U. Fullwood
Minimum invested
$660,000
No. of funds owned
8
Fees paid
$1.2 million
André F. Perold
Minimum invested
$110,000
No. of funds owned
2
Fees paid
$1.6 million
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