(1)
Indexes force trading. Trading is expensive in some asset classes. This problem is reduced with careful management, well designed indexes, and the ETF share class, but still exists, and probably will make some asset classes impractical for Vanguard, perhaps including microcap US or international, or deep value small international.
(2)
More controversially, there are academically demonstrated reasons to avoid certain stocks, and favor others, rather than invest purely passively. Such strategies could be added to indexes, but could add prohibitive trading costs. WIth funds that did not adhere to indexes, trading costs might not be too large for some stragegies. An example might be avoiding companies that are in bankruptcy.
This second reason is not required to consider a fund that doesn’t use an index.
Vanguard could try a single test fund, with a creative name that explains the difference succinctly.
Vanguard has investor education pamphlets on many topics. This one could be linked from the fund page.larryswedroe wrote:it's Vanguard's choice to stick with simple index funds because they choose to do so---now that comes with a price to it's investors in tax inefficiencies, lower returns and higher trading costs. They clearly could choose to offer products that seek to minimize/eliminate the negatives of indexing. But they have chosen not to, There are plenty of funds that don't require advisors that also use strategies that improve on pure indexing based on popular retail indices. DFA on other hand by not making their funds available to retail investors doesn't have to deal with individual investors and explaining to them why their funds have massive tracking errors in some years--no 800 lines to man and manage, and thus lot lower expenses than they would have if ran a retail fund. In other words it's a business decision by both firms.