Vanguard fund managers win Morningstar awards
OREANDA-NEWS. February 22, 2016. Morningstar, Inc., has named the investment advisory teams of two actively managed Vanguard funds as 2015 Morningstar Fund Managers of the Year:
- The Vanguard Wellesley® Income Fund team—Wellington Management Company LLP's John C. Keogh and W. Michael Reckmeyer III—was named Allocation Fund Manager of the Year.
- The Vanguard Market Neutral Fund team—Vanguard Quantitative Equity Group's James D. Troyer, Michael R. Roach, and James P. Stetler—was named Alternatives Fund Manager of the Year for portfolio management. They also received a nomination last year.
The awards recognize portfolio managers that Morningstar research analysts believe perform consistently well using a repeatable, well-executed process. The analysts considered only funds with Gold, Silver, or Bronze Morningstar ratings for the awards.*
"We are pleased that Morningstar analysts included the fund management teams for Vanguard's Wellesley Income and Market Neutral Funds among their U.S. Fund Managers of the Year," said Tim Buckley, Vanguard chief investment officer. "Their selection reflects our deep belief that low costs, talented portfolio managers, and a disciplined, proven, coherent process are the best approach to achieving competitive results over time."
Why Morningstar picked these Vanguard funds and managers
The \\$40.8 billion Wellesley Income Fund seeks to provide long-term growth of income and a high and sustainable level of current income, along with moderate long-term capital appreciation. It offers exposure to stocks and investment-grade** bonds.
"Stability has been the key to this fund's success," Morningstar wrote in announcing the fund's selection as Allocation Fund Manager of the Year. "Unlike many conservative-allocation peers, it doesn't make tactical shifts between stocks and bonds."
The \\$751.5 million Market Neutral Fund seeks to provide long-term capital appreciation while limiting exposure to general stock market risk. Its goal is to "neutralize," or limit, the effect of stock market movement on returns.
"Simply put, Vanguard Market Neutral Fund has produced what investors want from alternative strategies: very low correlation, solid returns when equity markets go south, and, on top of that, the lowest fees of any alternatives fund," Morningstar wrote in announcing the fund's selection as Alternatives Fund Manager of the Year.
What these winners have in common
Vanguard Portfolio Review Department oversees and evaluates all Vanguard funds and advisors as part of a process that provides rigorous oversight of funds and managers and helps ensure consistency in investment philosophy and approach. A committee of senior Vanguard management and the board of directors also meet regularly with fund advisors and are responsible for decision-making.
Both funds' managers rely on deep research and security selection. Wellington Management selects stocks that pay above-average dividends and are considered undervalued for 35% to 40% of the Wellesley Income Fund's assets. The remaining 60% to 65% of the portfolio is invested in investment-grade bonds, primarily corporates.
The Market Neutral Fund's selections are driven by a proprietary model developed by Vanguard Quantitative Equity Group's research and portfolio strategy team, led by Binbin Guo. The model seeks stocks with good fundamental growth at a reasonable price.
"We do our best every day, applying our experience and judgment, to provide our shareholders with high-quality money managers who can make consistently good decisions that generate competitive results," said Dan Newhall, who heads a team of analysts in the Portfolio Review Department responsible for investment oversight and manager search.
Fund performance data
Average annual returns as of January 31, 2016
| Fund | Expense ratio† | 1-year | 3-year | 5-year | 10-year | Since inception (year) |
|---|---|---|---|---|---|---|
| Wellesley Income Admiral™ Shares | 0.16% | 0.62% | 5.62% | 7.48% | 6.94% | 6.78% (5/14/2001) |
| Market Neutral Institutional Shares | 1.54% | 5.72% | 6.18% | 5.17% | 2.11% | 3.40% (10/19/1998) |
Note: The performance data shown represent past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so investors' shares, when sold may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month end, visit our website at institutional.vanguard.com/performance.
† Expense ratios listed are as of the most recent prospectus.
* The Morningstar Analyst Rating™ for funds is the summary expression of their forward-looking analysis of a fund. Morningstar Analyst Ratings are assigned globally on a five-tier scale running from Gold to Negative. The top three ratings, Gold, Silver, and Bronze, all indicate that their analysts think highly of a fund? the difference between them corresponds to differences in the level of analyst conviction in a fund's ability to outperform its benchmark and peers through time, within the context of the level of risk taken. The Analyst Rating does not express a view on a given asset class or peer group? rather, it seeks to evaluate each fund within the context of its objective, an appropriate benchmark, and peer group. For more information on Morningstar's methodology, go to Morningstar Analyst Rating™ for Funds Methodology Document.
** Investment-grade is a rating that indicates that the risk of default of the bonds in the portfolio is relatively low.
Notes:
- All asset figures are as of December 31, 2015, unless otherwise noted.
- All investments are subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk.
- An investment in Vanguard Market Neutral Fund is subject to strategy risk, short-selling risk, manager risk, and investment risk. It is possible that the stocks the fund holds long will decline in value at the same time that the stocks it holds short increase in value, thereby increasing potential losses to the fund. The fund's loss on a short sale is potentially unlimited because there is no upper limit on the price a borrowed security could attain. As with any actively managed fund, investors face the possibility that decisions made by the fund's advisors may not succeed, potentially causing the fund to underperform other funds with a similar investment strategy.
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