(PUB) Investing 2016

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16 • Fund Family Shareholder Association
Daniel P. Wiener is America’s leading expert on
the Vanguard family of funds. He is founder of
the Fund Family Shareholder Association and
chairman and chief executive officer of Adviser
Investments, LLC, a Newton, Massachusetts,
investment advisory firm (800-492-6868). As
editor of The Independent Adviser for Vanguard Investors, he is
a five-time recipient of the Newsletter Publishers Foundation’s
Editorial Excellence Award. He also edits the annual
Independent Guide to the Vanguard Funds. Mr. Wiener is often
quoted in the nation’s leading financial publications.
Jeffrey D. DeMaso, Editor/Director of
Research, works directly with Dan Wiener
researching and writing the multiple-award
winning Independent Adviser for Vanguard
Investors newsletter. He also leads the analyst
team for Adviser Investments, LLC. Jeff gradu-
ated magna cum laude from Tufts University with a B.A. in
economics, holds the Chartered Financial Analyst designation
and is a member of the CFA Institute and the Boston Security
Analysts Society.
DO-IT-NOW ACTION RECOMMENDATIONS
4 After nearly 17 years, it’s time to say goodbye to Selected Value. (See page 1)
4 Everyone wants a smaller tax bill, but don’t lose sight of the real aim: Maximizing after-tax
returns. (See page 6)
4 I don’t take everything Vanguard says at face value, and neither should you. The truth is
there are a few places Vanguard could stand to improve upon. (See page 14)
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4. Many of Vanguard’s in-house
fund managers don’t invest a nickel in
the funds they run.
I count 21 Vanguard managers out of
a total of 33, or nearly two-thirds, who
have no money invested in any of the
funds they run. That’s depressing.
While board members report their
holdings in increments rising to just
$100,000, portfolio managers are
required to report holdings in different
categories, ranging from $1 to $10,000
up to “over $1 million.”
Digging into the numbers, Pam
Tynan is the only in-house manager
who has more than $1 million in a fund
she runs. In this case, it’s Short-Term
Tax-Exempt, and her leadership in this
regard is a thing of the past. Tynan retired
> at the end of February. Three Vanguard
funds’managers have between $500,001
and a million dollars invested alongside
shareholders. Five funds’ managers have
between $100,001 and $500,000 invest-
ed. Another four funds have managers
with between $50,001 and $100,000
invested. And that’s about it.
Those numbers have been improving
at a snail’s pace and still leave plenty
of funds without any manager invest-
ment. To be fair, there are legitimate
reasons why a manager may not be
invested in the fund he or she runs. For
younger managers, a bond fund, for
instance, may not match up with their
time horizon and goals. Well-paid, high-
tax-bracket managers might not want to
own the taxable bond funds they run,
preferring to hold something that is tax-
exempt. Some of Vanguard’s managers
with indexing in their bones probably
invest the bulk of their money in the
“core” funds like Total Stock Market
or Total Bond Market Index, yet don’t
manage those funds.
Any way you slice the data, there
is plenty of room for Vanguard port-
folio managers to invest along-
side shareholders. One glance at the
holdings of outside managers from
PRIMECAP Management or Wellington
Management, and you’ll see what eating
your own cooking really looks like. n
Eating Their Own Cooking?
Hardly!
0 5 10 15 20 25
Vanguard Managers Investing in
Their Own Funds
Over $1 million
$500,001-$1,000,000
$100,001-$500,000
$50,001-$100,000
$10,001-$50,000
$1-$10,000
$0