With the Sept. 1 news that Vanguard Health Care Portfolio Manager Jean Hynes will become CEO of Vanguard subadvisor Wellington Management next year, Morningstar decided to reevaluate the $55.7 billion fund.
Hynes, who took charge of the fund in 2013, will continue to serve as its sole manager after she becomes CEO on July 1, 2021. She became a co-manager of the fund, which trades as VGHCX, in 2008.
“Vanguard Health Care’s personnel advantage won’t be as pronounced after its manager takes on a second role in mid-2021, so its People rating has been lowered to Above Average from High, and the Morningstar Analyst Ratings of both its share classes have been downgraded to Silver from Gold as a result,” wrote William Samuel Rocco, a senior manager and research analyst, on Wednesday.
Despite this move, Rocco says, Morningstar believes the fund “will continue to have a personnel edge over most of its rivals after Hynes becomes CEO.”
The said, though, “serving as the CEO of Wellington comes with significant responsibilities, as does running a large healthcare fund like this one, so this fund’s personnel advantage won’t be quite as strong,” he explained.
Hynes and the Wellington healthcare team should keep looking for “innovative firms with differentiated products or services and attractive valuations relative to their growth prospects, and she and the team will continue to allow stock selection to drive industry exposures and pay ample attention to foreign stocks,” Rocco said.
“This process has earned good results during Hynes’ seven-year tenure at the helm, and this fund is still an attractive option for investors who are seeking a geographically diverse healthcare offering and understand the risks that come with its sizable foreign stake,” according to the Morningstar analyst.
This fund has posted “fairly strong relative returns” in the past year, Rocco says, noting that its investor share class gained 25.8% for the 12 months through Sept. 30.