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Vanguard Changes Managers, Plans Fee Hike on 2 Stock Funds

By Dinah Wisenberg Brin

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Vanguard announced advisory management changes Friday to two equity funds — Vanguard Growth and Income Fund and Vanguard U.S. Growth Fund — including the removal of its in-house Vanguard Quantitative Equity Group (QEG) as an advisor for the funds.

Vanguard expects to increase the expense ratios for both funds as a result of the changes.

The mutual fund giant added Wellington Management Co. as an advisor to the Growth and Income Fund and will increase the portion of the U.S. Growth Fund advised by Wellington Management. Vanguard QEG will no longer advise either fund.

Following the advisory changes, the Growth and Income Fund will switch from an exclusively quantitative stock selection approach to using a mix of quantitative and fundamental approaches.

Current advisors Los Angeles Capital Management and D. E. Shaw Investment Management will continue to use their quantitative investment processes, and Wellington Management will conduct fundamental security analyses.

Vanguard said it believes the advisors’ complementary investment processes will enhance the fund’s ability to add long-term value for shareholders.

The U.S. Growth Fund will be managed by Wellington Management, Jennison Associates and Baillie Gifford Overseas. Each advisor has a distinct yet complementary approach to growth investing, the Vanguard said. The fund’s investment objective and principal investment strategies will remain the same.

For the Growth and Income Fund, the restructuring of the investment advisory arrangements is expected to increase the fund’s expense ratios to 0.37% for Investor Shares and 0.27% for Admiral Shares, from 0.32% and 0.22%, respectively.

The U.S. Growth Fund’s expense ratios are expected to change to 0.35% for Investor Shares and 0.25% for Admiral Shares, from 0.33% and 0.23% respectively.

The expected expense ratios for both funds exclude performance-based adjustments. Each fund will continue to be in the lowest-cost quartile of their respective peer groups, Vanguard says.

Each fund’s board of trustees concluded that changes to the advisory structure would best serve the funds and their shareholders, Vanguard said.

Wellington Management is Vanguard’s longest-serving external advisor, having managed client assets in funds since Vanguard’s founding in 1975. As of Dec. 31, it oversaw $392 billion of Vanguard fund assets globally and is Vanguard’s largest external advisor.

(Image: Bloomberg)

Dinah Wisenberg Brin

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