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Portfolio > Portfolio Construction > ESG

Vanguard Launches Actively Managed ESG Fund

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In a first for Vanguard, the firm launched an actively managed environmental, social and governance fund this week, which is expected to begin trading in early June after a two-week subscription period. Vanguard has offered ESG-focused index funds for almost two decades, and today has 11 funds in the United States, Australia and Europe with $10.8 billion in assets.

Its new Global ESG Select Stock Fund (VEIGX) advisor will be actively managed by Boston-based Wellington Management Co., which currently manages $360 billion of Vanguard funds and is its longest serving external advisor — and where John C. Bogle, Vanguard founder, got his start after graduating from Princeton.

Wellington has “a strong history of ESG investing,” according to a Vanguard statement. Portfolio managers for the fund are two veterans who serve as Wellington senior managing directors, partners and equity portfolio managers. Mark D. Mandel also has “extensive background in research and analysis” and served as director of global industry and research. The other manager, Yolanda C. Courtines, has extensive ESG research experience and international expertise, according to the statement.

The fund will focus on ESG practices that “can materially impact shareholder returns” by identifying roughly 40 companies that have diligent ESG practices, as well as strong business fundamentals and “prudent” capital allocation.

The fund is intended to be used within an existing portfolio, Vanguard states, and may hold some companies that may not fit certain exclusionary ESG strategies, “so the fund may not be ideal for investors seeking to exclude particular sectors or companies involved in  activities that are at odds with their individual values.”

The fund will offer Admiral shares, which have a minimum initial investment of $50,000, with an expense ratio of 0.45%, and Investor shares, with a minimum investment of $3,000, and an expense ratio of 0.55%. As a comparison, an average asset-weighted expense ratio of an actively managed labeled socially conscious fund by Morningstar is 0.71%, according to the statement.

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