Vanguard International Manager Decamps - Adviser Investments

Vanguard International Manager Decamps

Vanguard International Manager Decamps

Vanguard is making some alterations. We recently learned they’ve decommissioned the namesake 18th-century British naval ship—the HMS Vanguard—from their logo after nearly four decades. Now it’s time for one of their international fund managers to set sail.

After a busy summer of managerial shakeups, Vanguard is showing no sign of slowing down. On October 12, the fund giant announced that it had replaced Edinburgh Partners with Sprucegrove Investment Management on its $9.5-billion International Value fund. Sprucegrove, the Toronto-based investment manager, is now co-managing the fund with Lazard Asset Management and ARGA Investment Management.

Vanguard didn’t provide much insight into the thinking behind the decision. While noting in a press release that Sprucegrove would be managing assets “previously overseen by Edinburgh Partners,” nothing additional was said about Edinburgh. And there was no reference to its star manager, Sandy Naim, who was added to the portfolio management team (with some fanfare) in May 2008.

What’s Sprucegrove bringing to the table? Vanguard has been tight-lipped, but one thing to note is that the asset manager takes its ESG (environmental, social and governance) issues seriously. Like Vanguard, Sprucegrove has signed the U.N.’s Principles for Responsible Investment. Regardless of whether that helps performance (and the jury’s still out on that one), it certainly helps with marketing.

That familiarity with ESG might be a nice selling point, but when all is said and done, it’s performance that Vanguard is looking for—and they need it. Since hiring Edinburgh in May 2008, International Value has been the single worst-performing active foreign or global fund at Vanguard by a wide margin. And while you can’t pin the blame entirely on one manager when three different teams are involved (and Vanguard chopped and changed managers in 2012 as well as 2013), something has not gone right at International Value.

Vanguard International Value Has Lagged Over Time

wdt_ID Vanguard Fund Return May 2008–Sept 2020
5 International Growth 138.4
6 Global Equity 104.6
7 International Explorer 62.1
8 Pacific Index 39.9
9 Developed Market Index 26.9
10 World ex.-U.S. Index 24.1
11 Total International Stock Index 21.6
12 European Index 17.1
15 Emerging Markets Stock Index 14.6
16 International Value 12.1

Sources: Morningstar, Adviser Investments.

Even before Edinburgh came on board, International Value shareholders were suffering. It’s clear that Vanguard hasn’t found the right mix of managers—and we’re not convinced that Sprucegrove will bring anything dramatically different to the fund. We’ll be watching. 

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