VG kills 2 active funds

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Saphomd
Posts: 165
Joined: Tue Apr 03, 2012 6:11 pm
Location: SF, CA

VG kills 2 active funds

Postby Saphomd » Wed Jan 11, 2017 11:40 am


btenny
Posts: 3959
Joined: Sun Oct 07, 2007 6:47 pm

Re: VG kills 2 active funds

Postby btenny » Wed Jan 11, 2017 11:50 am

Very very interesting story. According to Morningstar these two funds were Institutional funds run by Vanguard that beat the SP500 for over a decade by about 40-100 basis points after fees EVERY year. The story goes on to say they think the fund could continue to beat the Index in the future. They speculate that the reason the funds are closing is the major buyer is going elsewhere with their money. So they are closing the fund.

Tamalak
Posts: 341
Joined: Fri May 06, 2016 2:29 pm

Re: VG kills 2 active funds

Postby Tamalak » Wed Jan 11, 2017 12:11 pm

The fact that they matched the index so tightly (outperforming very slightly and very consistently) leads me to think these were more like "index funds with tweaks" than actual stock picking.

inbox788
Posts: 3875
Joined: Thu Mar 15, 2012 5:24 pm

Re: VG kills 2 active funds

Postby inbox788 » Wed Jan 11, 2017 12:51 pm

Tamalak wrote:The fact that they matched the index so tightly (outperforming very slightly and very consistently) leads me to think these were more like "index funds with tweaks" than actual stock picking.


Vanguard Structured Large-Cap Equity (VSLIX) and Vanguard Structured Broad Market (VSBMX).
https://ca.finance.yahoo.com/q/hl?s=VSLIX
https://ca.finance.yahoo.com/q/hl?s=VSBMX

That's exactly what they did, but still beat the index. And there was stock picking involved in the tweaks. The question is whether they got skill or got lucky. If you decide that it's skill, and the advantage is sustainable, why not take the extra 1% or 0.1% over fees? Or has Vanguard realized they just got lucky this last decade and are quitting while they're ahead and before the luck runs out?

The Structured funds took such discipline one step further, maintaining such strict controls that they were, in effect, enhanced-index funds. In the past five calendar years, for example, Vanguard Structured Large-Cap Equity only once finished as far as 2 percentage points away from its benchmark, the S&P 500--that occurred in 2014 when it beat the index by 2.07 percentage points.
...
Such an approach flies in the face of today’s accepted wisdom, which is that active managers “can’t beat the indexes by being the indexes.” That is, rather than diversify broadly so that they minimize the effect of their decisions, portfolio managers should instead be bold. When they differ from an index, they should make that action meaningful. They should show high conviction. They should have a high Active Share.

VLACX Vanguard Large Cap Index Fund
VIVAX Vanguard Value Index Fund
VMGAX Vanguard Mega Cap Growth Index Fund (top performer!)
This was a decade where Large Cap Growth beat out Value, so it can be inferred that they overweighed the growth components. Are the fund managers prescient enough to know when to switch strategies when the game changes?

http://quotes.morningstar.com/chart/fun ... 2%3A955%7D


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