Feb. 1, 2005 — The Vanguard Group said it has added Kalmar Investment Advisers, a money management firm that focuses on small-cap stocks, to the team of five companies that runs the $9.6 billion Vanguard Explorer Fund (VEXPX), which invests in small companies.
Vanguard also said it will change the benchmark for three of its index funds, substituting the MSCI US Broad Market Index for the Dow Jones Wilshire 5000 index. The change applies to the $57-billion Vanguard Total Stock Market Index/Inv (VTSMX), the $1.2-billion Vanguard Instl Total Stock Market/Instl (VITNX), and to the stock portion of the $7.3-billion Vanguard Balanced Index/Inv (VBINX), which also invests in bonds.
Initially, Kalmar is expected to manage a “modest portion” of the Explorer Fund’s assets, Vanguard said. To minimize the tax consequences of re-apportioning assets to the firm, Vanguard said it will direct new cash inflows, and a “designated amount” of the fund’s current cash holdings, to Kalmar.
At the end of 2004, Grantham, Mayo, Van Otterloo & Co. LLC managed about 28% of the fund’s assets, and another 5% was held in cash. The remaining assets were split among Vanguard’s quantitative equity group (24%); Grantham Investment Management Inc. (21%); Wellington Management Co. LLP (15%); and Chartwell Investment Partners (7%).
Kalmar, which oversees money primarily for institutions, manages about $1.7 billion, including the $370-million Kalmar Growth-With-Value Small Cap Fund (KGSCX). The firm looks for undervalued shares of “promising growth companies,” Vanguard said.
Kalmar’s portion of Explorer’s portfolio will be run by Ford Draper Jr., who founded the firm and is its president and chief investment officer, Vanguard said in a regulatory filing.
Vanguard said it does not expect Kalmar’s addition to the management team to have a “material impact” on the expense ratios of the funds Investor and Admiral class shares, which stand at 0.57% and 0.43% of assets, respectively.