August 11, 2003

Vanguard Fires Equity Income Fund Manager

Aug. 8, 2003 -- Vanguard Group has fired Newell Associates, which had helped run the $2.6 billion Vanguard Equity Income (VEIPX) since its inception 15 years ago, and begun managing part of the portfolio in-house.

Vanguard said its Quantitative Equity Group will oversee 30% of the fund's assets. Wellington Management Co., which had been responsible for 30%, will now handle 50%. The fund's other outside manager, John A. Levin & Co., continues to manage 20%. Newell had managed 50% of the assets.

Vanguard chairman John J. Brennan said in a prepared release that the company believes the fund's revamped management team "offers the best combination of investment approach, expertise and resources to serve shareholders going forward."

A Vanguard spokesman declined to elaborate on the release when asked why Newell was dismissed. Representatives of Newell could not immediately be reached for comment.

The fund has topped its peers in recent years, but has lagged them lately. Vanguard Equity Income returned 9.3% through July, while the average large-cap value fund gained 12.8%. The Vanguard fund lost 15.7% in 2002 and 2.3% the year before, while similar funds were off 20.1% and 5.3%.

Vanguard said it expects the management change to improve the fund's expense ratio because its unit, which uses computer screens to determine fund holdings, will provide advisory services at cost. The fund's Investor class shares carry an expense ratio of 0.49%, and lower-cost Admiral shares have an expense ratio of 0.39%, according to Vanguard.

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