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Portfolio > Portfolio Construction

Vanguard Shakes Up International Fund Team

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(Photo: AP)

The $2.4 billion Vanguard International Explorer Fund (VINEX) is being restructured with the addition of Scottish-based manager Baillie Gifford Overseas LTD as an investment advisor.

The Vanguard Whitehall Funds board of trustees approved the move, according to a filing Monday with the Securities and Exchange Commission.

Brian Lum, CFA, and Stephen Vaughan will be co-portfolio managers of the Baillie Gifford portion of the fund. Operating since 1908, Baillie Gifford has more than $260 billion in assets.

Vanguard’s recent SEC filing shows the following changes to existing managers of the International Explorer Fund: Wellington Management replacing Simon Thomas with Mary L. Pryshiak, CFA, as manager; and Schroder Investment adding Luke Biermann, CFA, as a co-manager with manager Matthew Dobbs set to retire from that role in early 2021.

More on the New Adviser

According to the prospectus change, “Baillie Gifford analyzes a company’s ability to grow at an above-average rate by considering the industry in which it operates, any sustainable competitive advantages the company has within that industry, the ability of management to execute on the market opportunity before them, and whether the company can fund growth with internally generated cash flows.”

Baillie Gifford has, historically, “been willing to pay a premium for companies it believes can deliver superior growth,” it states.  The firm has some $324 billion in assets under management and advisement.

As a result of the move, Vanguard will be increasing its expense ratio to 0.41% from 0.39%. The fund had a 21.91% return in 2019, and is down 4.69% YTD, according to Morningstar, which gives it one star.

In June, Baillie Gifford topped both Vanguard and Blackrock in United Kingdom-based funds flows with an “aggressive focus on growth and technology, a report in Portfolio Adviser stated, citing Morningstar estimates that the active-focused fund shop took in about £691 million (or $902 million) of net flows.

Recently, Vanguard announced it was changing the benchmark of its actively managed Vanguard Energy Fund, while boosting the net expense ratio on it by about one basis point to 0.33% for investor shares and 0.25% for admiral shares.

“Vanguard Energy Fund will increase exposure to utilities stocks starting in late 2020 as it adapts to the energy sector’s evolution away from fossil fuels and toward renewable energy sources,” company spokeswoman Jessica Emery told ThinkAdvisor.

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