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Vanguard plans 3 new mutual funds, open to Personal Advisor Service investors only

Erin Arvedlund, The Philadelphia Inquirer on

Published in Home and Consumer News

Vanguard, which has pioneered low-cost funds that passively track the stock market, plans to launch three new actively managed funds later this year, but they will be available only to customers of the company's adviser service, which charges a 0.30% annual fee.

The funds — Advice Select Dividend Growth, Advice Select International Growth and Advice Select Global Value — will be offered to clients of Vanguard's hybrid robo-adviser, the Personal Advisor Service.

Vanguard, which has a founding reputation for low-cost index funds, already has standout actively managed mutual funds.

And while Vanguard's advisory service has grown, it remains small, making up just $240 billion in assets out of Vanguard's $8 trillion total.

Clients of the adviser service have previously leaned on Vanguard's "total market" index to build plain-vanilla portfolios.

With the latest move, Vanguard acknowledges that "active management matters, but that concentrated active portfolios can help add value to your portfolio," said Dan Wiener, editor of the Independent Adviser for Vanguard Investors newsletter, which is independent of the company.

 

Advice Select Dividend Growth, run by Wellington's portfolio manager Don Kilbride, will be a version of the existing Vanguard Dividend Growth fund, a portfolio of about 40 stocks. Vanguard temporarily closed Dividend Growth to new investors in 2016 when it reached about $30 billion in assets. It reopened the fund to investors in August 2019. Today, the fund has more than $50 billion and is open to anyone with a minimum $3,000 to invest.

For the adviser-service-only Advice Select fund, Kilbride will run an even more concentrated portfolio — and it will cost investors nearly double, with an expense ratio of 0.45% versus 0.26% for the Dividend Growth fund that he has managed for the past decade and a half.

"Pile that atop the annual fee of 0.30% for PAS [the advisory service] and it starts to add up," said Wiener, for a total fee of 0.75% annually. But that's still relatively cheap for an actively managed fund with its track record, he added.

The Scotland-based investment firm Baillie Gifford will manage Advice Select International Growth. As with Advice Select Dividend Growth, International Growth will be more concentrated and more expensive than its sibling fund. David Palmer, manager of Advice Select Global Value, will be the manager.

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