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Morningstar FundInvestor
April 2016
David Poppe will remain as sole manager of the fund.
(He may add a comanager in the future.) He also
plans to establish an investment committee with himself
and three other senior members of the team. The
plan is to make the process more collaborative, as well
as to introduce checks and balances into the process.
For example, the other three members of the investment
committee could override Poppe on a buy/sell decision.
The investment committee is also working to draft a set
of rules around risk management.
With Goldfarb leaving the firm, the board will be down
another person. With Tim Medley having joined
the board on Monday, it would like to add another
outside board member as well as an insider.
Top-holding
Valeant Pharmaceuticals
VRX
has been
immersed in controversy during the past six months.
The issues initially concerned the company’s relationship
with now-defunct pharmacy Philidor and accounting
questions but quickly morphed into more-fundamental
questions about its business model, pricing practices,
management, transparency, and debt load, as well as
an
SEC
investigation. Valeant’s shares fell more than
40%
on March
15
after the company lowered its
2016
forecasts and raised the possibility of default on some
of its debt.
As Valeant’s largest shareholder, this fund has been hit
hard on a number of fronts. With Valeant’s shares
down more than
70%
since mid-September, the fund’s
once-exceptional trailing results are in tatters going
back
10
years. The damage has been so severe because
the Valeant position was
28
.
7%
of assets in June
2015
before the share price started falling last August.
Exiting shareholders have put further pressure on the
fund by pulling out nearly
$800
million over the six
months through February
2016
. Given that the fund held
just
5
.
2%
of assets in cash as of year-end
2015
, which
was low by historical standards, management has likely
been selling shares to meet redemptions.
A Very Contrarian Start to 2016
The first quarter of
2016
proved to be quite a reversal
of fortune for a variety of markets. The worst-per-
forming fund categories from
2015
enjoyed good to
great returns so far in
2016
. Latin American equity
funds gained
15%
, energy equity funds gained
2%
,
commodities funds rose
1%
, and precious metals
bounced
41%
.
On the flipside, the top-performing categories of
2015
started
2016
in the red for the most part. Japan
funds were down
4%
, health funds fell
13%
, foreign
small/mid-growth fell
2%
, and technology fell
2%
.
One exception was consumer defensive, which had a
strong gain of
4%
in the first quarter.
Vanguard Launches Foreign Dividend Funds
Vanguard introduced its first dividend-oriented
international equity index funds on March
2
. The new
funds are
Vanguard International High Dividend
Yield Index
VIHAX
and
Vanguard International Divi-
dend Appreciation Index
VIAAX
.
Vanguard International High Dividend Yield Index
follows an income-investing strategy, focusing on
companies with high dividend yields. The fund
will seek to track the
FTSE
All-World ex
US
High
Dividend Yield Index, a benchmark of more
than
800
of the highest-yielding large-and mid-cap
developed- and emerging-markets securities.
Vanguard International Dividend Appreciation Index
emphasizes stocks exhibiting dividend growth and
seeks to track the Nasdaq International Dividend
Achievers Select Index, which comprises more than
200
all-cap developed- and emerging-markets
stocks with a track record of increasing annual
dividend payments.
Both funds have investor, admiral, and
ETF
share
classes that come with minimum investments of
$3
,
000
,
$10
,
000
, and none, respectively. For Vanguard
International High Dividend Yield Index, the expense
ratio is
0
.
40%
for Investor shares and
0
.
30%
for the
other two. For Vanguard International Dividend
Appreciation Index, the Investor shares charge
0
.
35%
while the other two share classes charge
0
.
25%
.
K