Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Comments

  • Ariel’s initial target allocation will be 10% of Vanguard Explorer Value Fund, with the balance of assets divided evenly between the fund’s two other tenured value managers.
    Hopefully this will improve these value funds.
  • American Funds are known for having lots of managers - some not even named. (And lots of fund classes too)

    But some others have many managers too. Fido Balanced has 12 named managers.

    VG may have thought that its Explorer didn't have enough with only 9 named managers from 5 subadvisors. So, it adds more with 6th subadvisor.

    May be someone has info on what is the record on this? Absolute or relative (per billion AUM).
  • edited February 2
    Vanguard often has too many subadvisors for its active funds.
    I prefer only one or two subadvisors on a fund.
    I don't like it when there are "too many cooks in the kitchen."
  • edited February 4
    Explorer fund is a small cap fund. Having more subadvisors don’t necessary translate improved performance. Each subadvisor has their unique stock picking process and having 6 of them is already diluting the “best” ideas and trading off the fund’s performance.

    For active managed small cap funds, there are better choices elsewhere.
  • Vanguard often has too many subadvisors for its active funds.
    I prefer only one or two subadvisors on a fund.
    I don't like it when there are "too many cooks in the kitchen."

    --
    Well, sure, but I suspect that for those funds which have outside advisers, Vanguard is purposefully slotting multiple managers, not just to provide diversification of returns, but as a very clever means of controlling costs: If a fund has 4 managers, Vanguard can threaten to yank any manager off the fund if those managers don't agree to keep fees low. -- its all about keeping those managers in a state of relative disadvantage when it comes to renegotiating fees. More managers keeps the fee levels down.


  • Edmond said:

    --
    Well, sure, but I suspect that for those funds which have outside advisers, Vanguard is purposefully slotting multiple managers, not just to provide diversification of returns, but as a very clever means of controlling costs: If a fund has 4 managers, Vanguard can threaten to yank any manager off the fund if those managers don't agree to keep fees low. -- its all about keeping those managers in a state of relative disadvantage when it comes to renegotiating fees. More managers keeps the fee levels down.

    Probably explains why TMSRX has 5 managers. Those guys must be working for peanuts.

  • edited February 7
    Some Vanguard funds have one subadvisor, i.e. PRIMECAP and Wellington, while other have three or four subadvisors. Instead of replacing those don’t do well, Vanguard likes to add more.

    Back in the 90’s, Litman Gregory launched a series of Masters Selected funds. Each funds is run by a team of “star” managers with their unique strategies. These funds were volatile with so so performance.
  • edited February 7
    Edmond said:

    Well, sure, but I suspect that for those funds which have outside advisers, Vanguard is purposefully slotting multiple managers, not just to provide diversification of returns, but as a very clever means of controlling costs: If a fund has 4 managers, Vanguard can threaten to yank any manager off the fund if those managers don't agree to keep fees low. -- its all about keeping those managers in a state of relative disadvantage when it comes to renegotiating fees. More managers keeps the fee levels down.
    -----------------------------------------------------------------------------------
    I don't believe cost control is Vanguard's primary goal when it hires multiple subadvisors for a fund.
    The following quotes are from Dan Newhall who leads the oversight and manager search team at Vanguard.

    "More broadly, in relation to our multi-manager approach, we believe that combining distinct, yet complementary managers provides the potential for both a more predictable pattern of returns and lowers volatility."

    "If you can start with a proposition that’s lower cost, then you have already shifted the odds in your favor.
    But low cost in and of itself is insufficient – we are not simply trying to find cheap managers.
    It’s [about] low cost and high quality."


    Link

  • edited February 7
    Sven said:

    Some Vanguard funds have one subadvisor, i.e. PRIMECAP and Wellington, while other have three or four subadvisors. Instead of replacing those don’t do well, Vanguard likes to add more.

    Back in the 90’s, Litman Gregory launched a series of Masters Selected funds. Each funds is run by a team of “star” managers with their unique strategies. These funds were volatile with so so performance.

    I recall the Litman Gregory Masters' Select funds.
    Litman Gregory selected several of the hottest "star" managers to run each fund.
    IIRC, relative performance was good for a while before deteriorating.

    Litman Gregory Masters' Select Value Fund (MSVFX)
    "Mason Hawkins of Longleaf Partners (LLPFX), Bill Miller of Legg Mason Value (LMNVX), Bill Nygren of Oakmark Select (OAKLX), and Larry Sondike of Mutual Shares (TESIX) will run the fund.
    Like the two other Masters' Select funds, this fund will contain each manager's favorite stock picks."


    The two other funds were Litman Gregory Masters' Select Equity Fund (MSEFX) and Litman Gregory Masters' Select International Fund (MSILX).
  • Historically, VG has quietly changed external advisors or their allocations, but it famously did high profile firing of GMO and AllianceBernstein. I don't think VG needs so many external advisors (now 6 for Explorer) to keep them on their toes and 2-3 should be enough for that.

    VG also did high profile firing of indexer MSCI in favor of unknown CRSP almost 10+ years ago.
Sign In or Register to comment.