Vanguard to Launch China Select Stock Fund

Vanguard to Launch China Fund

December 8, 2021

In This Issue:

Vanguard to Launch China Fund

Vanguard has announced plans to launch a China fund early next year, China Select Stock. The new fund represents a significant departure from the broad-based indexes the Malvern, Pennsylvania, giant is known for: It will be the firm’s first single-country fund, and it will be actively managed.

Indeed, in an announcement, Vanguard went so far as to tout the new fund’s managers’ “track record[s] of outperformance in Chinese equity markets”—a bold statement from a firm that has typically stayed mum on managers’ historic performance when making the case for their funds, instead often focusing on factors like risk and alpha.

Who are the managers Vanguard is putting such trust in? Wellington Management and Baillie Gifford. Both firms have been longtime Vanguard subadvisers. Baillie Gifford has the longer record in China: Sophie Earnshaw and Mike Gush co-manage a China Equities strategy at Baillie Gifford, with Gush working on the fund since its 2006 launch. Earnshaw joined him in 2013. Their counterpart at Wellington, Bo Meunier, doesn’t have as extensive a history, though he has managed an Irish-domiciled China fund since the end of January 2020.

Vanguard seems to feel that strong active management is the key to achieving solid performance in what it called China’s “large, but inefficient, equity market.” The new fund will take a broad view of the Chinese market, according to its prospectus, potentially targeting both mainland and Hong Kong- or Macau-based firms, as well as firms which derive most of their revenue from China.

So is this new China fund one you should hold? At Adviser Investments, we’re always keen to keep a weather eye on the Chinese market. We believe having some exposure to the world’s second-largest economy—and one of its most rapidly growing—is wise for the long-term health of your portfolio. But it’s important to ascertain how much exposure you may already have to China before adding on a concentrated China fund. You might be surprised.

Many emerging market and international funds already keep a substantial portion of their holdings in Chinese stocks. (In Vanguard’s own Emerging Market Stock Index, Chinese stocks account for 37% of the fund’s portfolio.) Some growth- and tech-focused funds also have substantial holdings in China-based firms like Alibaba and Tencent.

If China firms are already strongly represented within your existing mutual fund holdings, adding a single-country fund like Vanguard’s won’t mean diversifying your holdings but rather doubling down on a China bet. And given the volatility of the market and government, it’s wise to be sure that investing in China fits with your overall investment strategy and risk tolerance.

Chart of the Week: Volatility Is Back

With the emergence of omicron, volatility has returned to the market. In the week following Thanksgiving, we had five consecutive trading days when the S&P 500 index rose or fell by 1% or more—the first time that has happened all year. While three of the five days were to the downside, keep things in perspective: The index was only 2.7% below the high it hit on Nov. 18 as of last Thursday’s close. And, although it’s not part of this particular chart, the market is back up this week on hopes that omicron may prove less impactful than initially feared.

Volatility Is Back
Note: Chart tracks consecutive days of an absolute change (positive or negative) of more than 1% from the prior day’s closing value for the S&P 500 index from 12/30/2020 through 12/2/2021. Sources: S&P Dow Jones Indices, Adviser Investments.

Podcast: Celebrating 100 Episodes of Our Podcast…With $100K!

Seems like only yesterday that we launched The Adviser You Can Talk To Podcast and now it’s turning 100. We released our inaugural episode in February 2018, and we’re just getting started. In recognition of this milestone, Director of Research Jeff DeMaso joined Manager of Financial Planning Andrew Busa and Account Manager Diana Linn for an entertaining and instructive discussion about the best ways to handle a windfall of $100,000. Click here to listen!

We’re grateful for the support of our listeners and subscribers, which helped us reach this landmark. Don’t forget to subscribe via your favorite podcast platform for many more episodes to come!

Adviser Investments’ Today’s Market Takeaways

There’s no shortage of hyperbolic headlines and provocative punditry in the financial media. But you won’t find such hysterics here. In Today’s Market Takeaways, members of our investment team provide timely videos that clearly and concisely explain what we’re seeing in the markets.

Vice President Steve Johnson offered his thoughts on why a small pullback in growth stocks may be a good thing, while Research Analyst Liz Laprade talked about what the latest crypto crash means for bitcoin bulls.

We hope you find these episodes engaging and accessible. If there are any topics you’d like us to address, please send an email to info@adviserinvestments.com!

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. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.


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