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Fund Family Shareholder Association
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
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
PERFORMANCE
U.S. Growth Emerging?
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
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-
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-
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
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
In With the Old, Out With the New
Fund No.
Ticker
Inception
OLD
Developed Markets Index
227
VDMIX
May 2000
NEW
Developed Markets Index
1397
VDVIX
Dec. 2013
OLD
Admiral Developed Markets Index
5227
VDMAX Sept. 2011
NEW
Admiral Developed Markets Index
127
VTMGX Aug. 1999
Developed Markets’
Admiral shares now
have a longer track record
than they used to, which
makes the fund look
better than it did.
