Vanguard Gives Fund a Makeover - Adviser Investments

Vanguard Gives Fund a Makeover

Converting a Winner

Vanguard Gives Convertible Securities Flexibility

On December 20, Vanguard announced that it was sprucing up its Convertible Securities fund for the New Year, increasing its ability to forage overseas and adding a duo of co-managers to the fund to help oversee the fund’s new foreign holdings. In addition, the fund will now be benchmarked against a global index standard.

Until this change, Convertible Securities was benchmarked to the Bank of America (BoA) Merrill Lynch (ML) All U.S. Convertibles Index, which is a market-capitalization-weighted index of domestic corporate convertible securities (high-yield securities that act something like a stock, but pay dividends more like bonds). Going forward, the fund’s new benchmark will be a 70%/30% mix of the BoA ML All U.S. Convertibles Index and the BoA ML Global 300 Convertible ex-U.S. Index. In addition, the fund’s former 20% restriction on international holdings has been lifted (at the end of November, Convertible Securities had only 3.0% allocated overseas, which will certainly go up in the coming months).

The fund’s two new managers are Jean-Paul Jacques Nedelec and Abe Ofer, both long-term members of Oaktree Capital Management’s team, having come aboard at the firm’s founding in 1995. They join Convertible Securities’ veteran manager, Larry Keele, who has managed the fund since the end of 1996. Keele will be managing the domestic portion of the portfolio, while Nedelec and Ofer will be responsible for the fund’s international holdings.

Nedelec was born in Paris and educated in France before attending San Diego State University in 1981. He has worked for Manufacturers Hanover Ltd. and Dai Ichi Kangyo Bank in London, as well as AXA Group in Paris. He joined Trust Company of the West in 1994 and operates out of Oaktree’s New York offices, co-managing the international convertible investments of the group.

Ofer got his start in investment management in 1984 with Trust Company of the West, where he worked his way up from an equity research analyst specializing in technology, to a credit analyst in TCW’s High Yield and Convertible Securities department. In 1989, he began to manage investments in “busted” convertible portfolios. He is a Managing Director at Oaktree. Ofer earned his BA in Mathematics from Reed College and an MBA in Accounting and Finance from the University of Chicago.

The increased international exposure adds an interesting new element to Convertible Securities, but should not be a cause for concern for investors. Keele, Nedelec and Ofer are all experienced convertibles traders, and incorporating a greater emphasis on overseas investments makes sense, as emerging and developing economies begin to account for more of the world’s markets.

We’ve found that Convertible Securities’ best use is in an income-focused portfolio where higher yields and lower risk are more important than absolute tax efficiency and performance. But it has very specific uses in a portfolio and is not necessarily the best choice for most investors.

Happy Holidays!

From our Adviser Investments family to yours, we wish you a merry, healthy holiday season and a Happy New Year!


About Adviser Investments
Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFs, fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trusts, foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016.

For more information, please visit or call 800-492-6868.

Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

The Barron’s rankings consider factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. This award does not consider client experience and is not indicative of future performance.

Editors at the Financial Times bestowed “elite” status on 300 firms in the U.S., as determined by assets under management, asset growth, longevity, compliance record, industry certifications and online accessibility.

© 2018 Adviser Investments, LLC. All Rights Reserved.