March 18, 2003 — Vanguard Group said Ian MacKinnon is retiring as head of its fixed income group, which manages $225 billion in assets.
In connection with MacKinnon’s departure, the company appointed George Sauter, who currently oversees its stock index funds, chief investment officer, a new position in which he is responsible for Vanguard’s in-house stock and fixed-income managers.
Sauter said Vanguard bond fund manager Robert Auwaerter will assume the majority of MacKinnon’s duties, including the oversight of the company’s bond funds. Sauter said Auwaerter will report to him.
In his expanded role, Sauter will oversee nearly $400 billion in assets, or about 70% of Vanguard’s $550 billion in mutual fund assets. Sauter said he does not plan to change the way Vanguard’s stock and bond funds are managed. “We’re very pleased with the development of our fixed-income group,” he said.
Daniel Wiener, editor of The Independent Adviser for Vanguard Investors, a newsletter, said MacKinnon’s departure will have no affect on the way Vanguard’s bond funds are run. That, he said, is because their managers have little leeway to adjust the types of securities they invest in.
“For the most part,” the funds are “very plain vanilla,” Wiener said. As for MacKinnon, Wiener said “he’s had a long and solid career.0″
Wiener noted that MacKinnon is stepping down at a time the bond market is still strong.
He said he does not believe that MacKinnon’s retirement is related to the performance last year of two bond index funds MacKinnon helps run. The funds, Vanguard Short Term Bond Index (VBISX) and Vanguard Total Bond Market Index (VBMFX), both trailed the benchmarks they track.
Vanguard has pointed out in reports to shareholders that the funds do not exactly replicate the holdings in their benchmark indexes because it would be impractical and too costly to own all the bonds in a target index.
The company attributed problems with the two funds to being overweight in telecommunications and energy trading companies during June and July, when those sectors were hurt by accounting scandals and the bankruptcy of WorldCom Inc. The company said it has since tightened controls on the funds’ sector weights and taken other steps to have them track their target indexes more closely.
MacKinnon could not be reached for comment. MacKinnon, who will step down on June 30, joined Vanguard in 1981 from Girard Bank in Philadelphia.