Vanguard Packs Another Manager Into International Explorer September 2, 2020 Adviser Fund Update Print In This Issue:Vanguard Packs Another Manager Into International ExplorerNew Leadership Coming to Top Vanguard Sub-AdviserPodcast: What’s So Great About Gold?Special Report: The ETF AdvantageAdviser Investments’ Market TakeawaysVanguard Packs Another Manager Into International Explorer No lazy days at the beach for Vanguard this summer. The fund giant wrapped up a busy few months by rethinking the management structure of its $2.4 billion International Explorer fund last week, bringing Baillie Gifford onto a roster that already included Schroder Investment Management, Wellington Management and TimesSquare Capital. The addition of Baillie Gifford to International Explorer marked a reversal of sorts for Vanguard. In recent years, they have retreated from a tendency to pack funds with too many managers—something that we strongly oppose because it waters down performance against an index. But here comes a new multimanager muddle. Baillie Gifford is having its moment in the sun in Malvern, Pa. With the 10% management stake in International Explorer, the firm has more investment “mandates” than any outside manager at Vanguard except Wellington Management. The Scotland-based investment firm manages portions of U.S. Growth, Global Equity, International Growth and Emerging Markets Select Stock. They also oversee a portion of the International Variable Annuity portfolio, giving them some $45 billion in Vanguard investor assets under management. Many Mandates and $45 Billion in Assets wdt_ID Fund Size (Billions) Baillie Gifford's Share Assets Managed 1 International Growth 51.4 66.0 34.0 2 U.S. Growth 35.8 15.0 5.4 3 Global Equity 6.8 50.0 3.4 4 International Variable Annuity 4.5 60.0 2.7 5 International Explorer 2.4 10.0 0.2 6 Emerging Markets Select Stock 0.7 25.0 0.2 7 Total 45.3 Source: Vanguard. (The PRIMECAP Management team, another Vanguard sub-adviser, runs even more money, with three funds and a variable annuity under its purview totaling more than $90 billion under management.) Is Baillie Gifford being spread too thin at Vanguard? Possibly. The move might lend a fresh perspective to International Explorer for a time, but adding a fourth team to lead this international small-cap fund doesn’t seem like a smart move overall. Vanguard’s multimanager approach purports to reduce the risk of a single manager exiting the firm or placing a bad bet that takes the portfolio down. But it also limits the ability of a manager to have a cohesive vision and add value for shareholders. Likewise, it leaves investors with less insight into how their money is being managed and leads to lower transparency into how and what each manager is contributing. Schroders is the loser here, seeing its allocation cut from 50% to 40%, while Wellington retains its 30% slug. Could Vanguard be building toward reducing headcount at the fund over the next year or two as Baillie Gifford gets its bearings? We’ll be watching. New Leadership Coming to Leading Vanguard Sub-Adviser We noted above that Wellington Management leads the pack of Vanguard sub-advisers when it comes to assets under management. And come next summer, there’ll be a new leader at Wellington’s helm. In breaking news yesterday, Wellington announced that Jean Hynes will be succeeding Brendan Swords as CEO of the Boston-based investment group when he retires at the end of June 2021. One of Wellington’s three managing partners, Hynes joined the firm in 1991 upon graduation from Wellesley College. She also serves as a global industry analyst covering pharmaceuticals and biotech. “I’m excited that Jean Hynes will be my successor,” said Mr. Swords in a press release. “Over the course of her nearly 30 years at the firm, she has demonstrated the vision, optimism, and fortitude to lead Wellington in the years ahead.” Hynes has been the sole manager of the $49.0 billion Vanguard Health Care fund since 2013 after being added as a co-manager in 2008. The plan is for her to continue running the portfolio following her appointment to Wellington’s top job. Podcast: What’s So Great About Gold? Even following its recent surge, making it one of the highest-flying investments of 2020, the merits of gold as an investment must-have remain hotly contested. For every passionate goldbug, there’s someone else dismissing it as a fringe fad. Listen to this lively discussion between Adviser Investments Director of Research Jeff DeMaso and Quantitative Investments Manager Josh Jurbala as they present the evidence you need to decide if this polarizing investment option is right for you, including: Why is gold having such a breakout year? What are the arguments for and against investing in gold? What risks may gold present in your portfolio? Is gold really an effective inflation hedge? …and much more! Gold has held a long and prominent place in investment history, but the debates about its true worth can create more questions than answers. For a definitive look at the potential benefits and drawbacks for investors, click here to listen now! Special Report: The ETF Advantage—Benefits and Risks of Exchange-Traded Funds Exchange-traded funds (ETFs) are an increasingly popular investment option that may be a worthy addition to your portfolio. But they remain a bit of a mystery for many investors. This special report, available exclusively from Adviser Investments, provides a jargon-free introduction to ETFs, including the differences between them and mutual funds, how to pick among the more than 2,100 ETFs on the market, and more. Topics include: ETFs’ eroding cost advantage Potential tax advantages of ETF investing Important risks to know before purchasing ETF shares It’s never too soon to become a more informed investor. Click here to read this free, no-obligation special report today! Adviser Investments’ Market Takeaways Calm and clarity have been sorely lacking when it comes to market news recently—that’s why we’re providing Today’s Market Takeaways, short videos in which a member of our investment team analyzes what the market is telling us. Recently, Equity Research Analyst Kate Austin provided insight on Apple’s stock split and the knock-on effects for the Dow Jones Industrial Average, and Vice President Steve Johnson discussed the Federal Reserve’s updated policy framework and the potential impact on inflation going forward. About Adviser Investments Adviser Investments is a full service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994, and have more than 3,500 clients across the country and over $6 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, with particular expertise in Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. Our minimum account size is $350,000. 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