Vanguard announced it will establish two wholly owned U.S. investment advisors, Vanguard Capital Management and Vanguard Portfolio Management, with distinct investment management and "stewardship" teams.
The change, which should be completed in 2026, comes nearly a year after Salim Ramji became the giant asset manager's first external CEO hire.
"Establishing separate investment management teams will create a number of benefits for our investors and our organization, including management teams with an even deeper focus, investment teams with greater flexibility, and highly talented crew with more opportunities for growth," the company said in a post on its website.
Vanguard doesn't expect the moves to affect expense ratios or fund performance and said they should streamline operations for its teams. The firm's portfolio managers will continue to manage its funds. Vanguard said it will provide further updates on the changes, which are subject to further consideration.
"We expect the investment stewardship teams’ focus on distinct portfolios to serve as another step in our long-standing work to further diversify perspectives in the proxy voting ecosystem over time," Vanguard said.
At Vanguard Capital Management, Sara Devereux will continue to lead the Fixed Income Group. Rodney Comegys will lead Global Equity Index Management, responsible for equity index products.
At Vanguard Portfolio Management, John Ameriks will continue to lead the Quantitative Equity Group and also will head Strategic Equity Index Management — responsible for internally-advised quantitative strategies and U.S. sector and style box equity index funds. They all will continue reporting to Greg Davis, Vanguard president and chief investment officer.
A 'Major Shift'
Jeff DeMaso, who edits the Independent Vanguard Adviser, called the plans a "major shift" that will split Vanguard into two wholly owned units, and noted the mutual fund and ETF firm quietly unveiled them on its corporate site rather than in a press release.
"Why the low profile? You could argue that Vanguard wanted to avoid rattling shareholders. Or, perhaps, they didn’t want to face tough questions just yet," he wrote.
Historically, the Vanguard Group was the sole advisor for all the company's mutual funds and ETFs, DeMaso and Daniel Sotiroff, senior manager research analyst for Morningstar, noted.
"Vanguard splitting its funds across two advisors shouldn’t change the investment experience for its clients, and it doesn’t impact the investor-friendly mutual ownership structure that distinguishes Vanguard’s funds," Sotiroff wrote.
He suggested two big reasons for Vanguard's decision.
"Its representatives cited the growth of its funds over the past several years. Their mammoth size now requires more focus than a single team could handle. That’s certainly true," Sotiroff wrote.
"Big funds, whether actively managed or index-tracking, often require more attention," he continued. "Vanguard offers some of the largest, and it has grown its personnel alongside its funds. Vanguard Total Stock Market Index VTSAX and Vanguard 500 Index VFIAX both have more than $1 trillion invested in them, and it has many others with billions."
Another reason may be that Vanguard owns a large chunk of all publicly traded stocks, with some stakes so large they exceed regulatory limits, he added. "That risk isn’t unique to Vanguard, but it means some of its index-tracking stock funds may have to cap their stakes in some stocks, and they may not track their target index as accurately as they had in the past. Likewise, it may restrict an active manager’s ability to express their best ideas."
So far, Vanguard has navigated those limits by making agreements with regulators, the Morningstar analyst wrote.
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