4 Vanguard Funds Pummeled by Outflows

[bikefish]

From Morningstar https://www.morningstar.com/funds/4-van ... outflows-2

[livesoft]

To save your time so you don't have to read the link, the funds are actively-managed:
Vanguard Wellington VWELX
Vanguard Wellesley Income VWINX
Vanguard Dividend Growth VDIGX
Vanguard Primecap VPMAX

I wonder how much of the cause of the outflows is that the owners are dying and their heirs want out and either money or index funds.

[blueheaven]

I think what heirs usually want is cash.

[VanGar+Goyle]

To save your time so you don't have to read the link, the funds are actively-managed:
Vanguard Wellington VWELX
Vanguard Wellesley Income VWINX
Vanguard Dividend Growth VDIGX
Vanguard Primecap VPMAX

I wonder how much of the cause of the outflows is that the owners are dying and their heirs want out and either money or index funds.

The article mentions movement to Target Date Funds, but I think that most children would not want their parent's old china, car, or mutual fund,
so they can invest like a 80 year old.

[KEotSK66]

Up until November I was 100% Wellesley Income (VWIAX) for 10 years, now I'm 80 - 85% VWIAX. I've been doing some thinking about the disposition of my portfolio upon my demise and made some changes to better address my strategic objectives. I also made 2 tactical changes to take advantage of what I expect is going to be a good investing climate for several years, striking while the iron is hot.

Back a few years VWIAX's NAV hit just above $73/share but it's been stuck between about $58 and $63 since then.

The imposed stagflation of those several years wreaked havoc with the fund's whole portfolio (35/65). I've always considered possible macro shocks, especially to VWIAX's bond allocation, and being an astute observer of the investment climate I was fully prepared.

I've been drawing 1.50% from the fund yearly so I've been able to reinvest the remaining 2.0% income and all the cap gains, allowing me to claw my way back to respectability. At least covering/replacing my draw has been an objective of mine for 25 years and it has worked well, I'm expecting good economic growth and low inflation to give the NAV a chance to recover although I'm not expecting it will go back to $73. If that NAV recovery occurs I'll be way ahead of my timetable because of the share base I've built up.

(The strategic portfolio changes were in my Roth-IRA, I added 12.5% allocations to both PRCFX and DODBX. The tactical changes were the addition of VWUSX and VGENX, totaling about 5%. I'll be RMDing in 2 or 3 years so I'll be making a few more changes then, likely the addition of a high dividend fund.)

[Harmanic]

I think this is more indicative of the shift to ETFs. Even some index mutual funds have seen outflows, especially asset allocation funds.

[KEotSK66]

I think this is more indicative of the shift to ETFs. Even some index mutual funds have seen outflows, especially asset allocation funds.

Bogle warned about ETFs, he was right...if you give people the chance to play portfolio manager they will do so.

[Feldman]

I've started working down VWELX (Wellington) through contributions to my donor-advised fund, which is in effect a small outflow to the fund. My amounts don't register, but I'm a small participant in the trend!

[Harmanic]

I think this is more indicative of the shift to ETFs. Even some index mutual funds have seen outflows, especially asset allocation funds.

Bogle warned about ETFs, he was right...if you give people the chance to play portfolio manager they will do so.

But this is a good thing for buy and hold investors. The fees generated from trading and market timing subsidize the rest of us, similar to how credit card interest and fees subsidize rewards programs.

[KEotSK66]

But this is a good thing for buy and hold investors. The fees generated from trading and market timing subsidize the rest of us, similar to how credit card interest and fees subsidize rewards programs.

The silver lining, thanks, I hadn't thought of that.

Another benefit of balanced funds, the poor little pizzas of the fund universe.

[KEotSK66]

I don't know much about the Primecap fund, back in the day their funds were always closed so I never bothered.

Wellesley and Wellington are the Rodney Dangerfields, especially Wellesley...income?, what's that?

VDIGX has always been a sleeper. My guess is "Dividend" in the name should translate to 4% yield and when they see 1.5% there's a disconnect. But the name is "Dividend Growth" which is just a reflection of earnings growth.

[dknightd]

From Morningstar https://www.morningstar.com/funds/4-van ... outflows-2

Why repost click bait?

[cas]

[. . .]

I wonder how much of the cause of the outflows is that the owners are dying and their heirs want out and either money or index funds.

The article mentions movement to Target Date Funds, but I think that most children would not want their parent's old [. . .] mutual fund,
so they can invest like a 80 year old.

The wording of the article is a bit ambiguous, but I think the 401(k) comment may be referencing the larger asset movement that occurs when 401(k) *investment committees* choose to remove actively managed multi-asset funds from their 401(k) investment line-ups:

I think the driver of flows in this case is the long-running move to target-date funds in 401(k)s. Balanced funds like Wellington and Wellesley Income used to be at the heart of 401(k)s, but they’ve been replaced by target-date funds [. . .]

Morningstar has articles from time to time about what has been going on with the 401(k) class action lawsuit industry. Here are a couple of paragraphs from one of those articles (from 2021), talking about how the class action lawsuits have influenced changes in 401(k) investment options:

Legal concerns have bolstered that decision [ of 401(k) sponsors to pare down their actively managed investment options]. Last year, more than 200 class-action lawsuits were filed against 401(k) plan sponsors, with the most common complaint being excessive fees. All actively managed funds levy higher expenses than do the lowest-cost index funds, and all sometimes trail their benchmarks. Consequently, putting an actively managed fund into a plan runs a risk that using an index fund rarely does: being on the wrong end of a lawsuit.

For that reason, the recently published monograph Defined Contribution Plans by the CFA Institute--an impartial, not-for-profit organization that represents investment researchers and managers--recommends to plan sponsors that "passively managed funds" be "the default choice for their plans." Indeed, absent a strong belief to the contrary, "sponsors should make available only passively managed options."

[bikefish]

From Morningstar https://www.morningstar.com/funds/4-van ... outflows-2

Why repost click bait?

Good morning. Is it better to rephrase what is in the link as a general posting to generate the discussion and not include the link? Or is the content in the link not worthy of bringing to people’s attention?

[nisiprius]

I don't know who wrote the headline asking "should you hold on to these unpopular Vanguard funds?" but whoever did should be ashamed of themselves.

Vanguard Wellington VWELX $114.0B
Vanguard Wellesley Income VWINX $49.3B
Vanguard Dividend Growth VDIGX $50.4B
Vanguard Primecap VPMAX $76.9B

I have never heard it said that you should choose funds based on "popularity." That's even worse than choosing them based on recent past performance. Is the headline a strawman just to give Russell Kinnell the opportunity to contradict it immediately ("absolutely not.")

If a fund had less than about $2 billion one might consider the possibility that it could be closed, merged, or liquidated, and it might be prudent to look for a convenient way to shift to something else.

VWELX is a balanced fund. I suspect it is the largest (and thus "most popular") of all such funds. What would you even compare it with?

Morningstar has an article, The best balanced funds, which provides me with a list. Actually they provide three; I'll use the second, "The best diversified balanced funds," because that's the one they put Wellington in. I used the ticker symbols as given; for Wellington, the result appeared to be the total for all share classes so I hope that's true for all.

T. Rowe Price Balanced RBAIX $4.7B
American Funds Mod Growth & Income BLPEX $14.6B
Vanguard Wellington VWELX $112.3B
T. Rowe Price Spectrum Moderate Allc TPPAX $2.0B
Vanguard LifeStrategy Moderate Gr VSMGX $21.2B
MFS Moderate Allocation MAMAX $6.5B
Dodge & Cox Balanced DOXBX $14.3B
Vanguard STAR VGSTX $22.7B
BlackRock Sustainable Balanced MDCPX $1.6B
PGIM Balanced PIBQX $1.0B
JP Morgan Investor Balanced OIBFX $5.5B
JPMorgan Investor Growth & Income ONGFX $4.8B



"Unpopular."

[Kenkat]

Why repost click bait?

Good morning. Is it better to rephrase what is in the link as a general posting to generate the discussion and not include the link? Or is the content in the link not worthy of bringing to people’s attention?

I’m glad you posted it, as a long time holder of Primecap I found it interesting.

[Harmanic]

I have never heard it said that you should choose funds based on "popularity." That's even worse than choosing them based on recent past performance.

It is a factor for me when choosing funds for taxable accounts. Large popular funds are less likely to be closed down and generate a taxable event. In tax sheltered accounts it matters less.

[dknightd]

Why repost click bait?

Good morning. Is it better to rephrase what is in the link as a general posting to generate the discussion and not include the link? Or is the content in the link not worthy of bringing to people’s attention?

Why did you post the link? Is it something that concerns you?

Pummeled is a strong word. Especially when the advice is to do nothing.

[bikefish]

Good morning. Is it better to rephrase what is in the link as a general posting to generate the discussion and not include the link? Or is the content in the link not worthy of bringing to people’s attention?

Why did you post the link? Is it something that concerns you?

Pummeled is a strong word. Especially when the advice is to do nothing.

I am relatively new to the website. From my brief time here a good portion of the discussion centers on Vanguard. The funds mentioned in the link get discussed quite a bit. I own the funds as well and found the information useful. I copied the headline to the subject, copied the link to the body and shared it. If the issue is the subject uses a strong word, I am not sure what to say.

[TBillT]

I recall in 2008 Morningstar said VWINX was risky because interest rates might go up. Well for many years interest rates went down, now some tick up.

[nisiprius]

Welcome to the forum, bikefish.

On the one hand, Morningstar is a legitimate website; Russel Kinnel isn't a sensationalist; the funds in question, particularly Wellington and Wellesley, are a topic of special interest in the forum; and I don't think anyone else posted anything about the outflows. So... keep it up.

On the other hand, the article itself is a nothingburger, and the criticism is mostly criticism of Morningstar, not of you.

You can change the thread title yourself. The thread title is always just the subject line of the initial post. You can change it by clicking the pencil icon on your initial post to edit it, and then changing the subject line.

This is just my suggestion: "Morningstar's Russel Kinnel notes outflows to Wellington, Wellesley, others."

Also, there's a forum rule against "naked links." It's not considered polite to post just a link, without any kind of summary or comment. At the very least you should have named the funds; as you see, livesoft courteously did that for you. I would have gone farther and quoted Kinnel's first paragraph.

[bikefish]

Welcome to the forum, bikefish.

On the one hand, Morningstar is a legitimate website; Russel Kinnel isn't a sensationalist; the funds in question, particularly Wellington and Wellesley, are a topic of special interest in the forum; and I don't think anyone else posted anything about the outflows. So... keep it up.

On the other hand, the article itself is a nothingburger, and the criticism is mostly criticism of Morningstar, not of you.

You can change the thread title yourself. The thread title is always just the subject line of the initial post. You can change it by clicking the pencil icon on your initial post to edit it, and then changing the subject line.

This is just my suggestion: "Morningstar's Russel Kinnel notes outflows to Wellington, Wellesley, others."

Also, there's a forum rule against "naked links." It's not considered polite to post just a link, without any kind of summary or comment. At the very least you should have named the funds; as you see, livesoft courteously did that for you. I would have gone farther and quoted Kinnel's first paragraph.

Perfect. Appreciate it.

[dknightd]

I am relatively new to the website.

Welcome to the site. I like your user name. It reminds me of the saying:
"A woman without a man is like a fish without a bicycle."

I try to avoid "click bait." Usually it is better ignored.

[bikefish]

I am relatively new to the website.

Welcome to the site. I like your user name. It reminds me of the saying:
"A woman without a man is like a fish without a bicycle."

I try to avoid "click bait." Usually it is better ignored.

I recall that saying as well….

Will avoid the click bait postings on my end.

[tibbitts]

Why did you post the link? Is it something that concerns you?

Pummeled is a strong word. Especially when the advice is to do nothing.

I am relatively new to the website. From my brief time here a good portion of the discussion centers on Vanguard. The funds mentioned in the link get discussed quite a bit. I own the funds as well and found the information useful. I copied the headline to the subject, copied the link to the body and shared it. If the issue is the subject uses a strong word, I am not sure what to say.

The thread subject and referencing the article: perfectly appropriate. Lots of us appreciate and using the Morningstar site for free (although free functionality has tailed off a little in recent years, which isn't exactly unique), so if they need to juice readership (and ad sales, whatever) a little with their article titles, so be it.

[White Coat Investor]

Those funds are mostly value funds. Don't discount just how much of the outflows are from performance chasing toward US Large Growth Tech stocks. I see signs of performance chasing every day now in emails, blog comments, forum posts etc. There's a lot of it going on right now.

[Beensabu]

Those funds are mostly value funds.

They're blue chip funds.

[rkhusky]

Those funds are mostly value funds.

They're blue chip funds.

Wellington used to be Value but they've also been chasing big tech recently, so are now considered Blend by Morningstar.

[goodenyou]

I think this is more indicative of the shift to ETFs. Even some index mutual funds have seen outflows, especially asset allocation funds.

Bogle warned about ETFs, he was right...if you give people the chance to play portfolio manager they will do so.

Yeah. Someone on this Forum, I don't know who , referred to ETFs as Grape Bricks.

[Beensabu]

They're blue chip funds.

Wellington used to be Value but they've also been chasing big tech recently, so are now considered Blend by Morningstar.

Some big tech is blue chip.

[slipknot]

The Morningstar article actually states that the mentioned funds are doing what they are supposed to do, and are solid choices for investors to consider.

[exodusNH]

To save your time so you don't have to read the link, the funds are actively-managed:
Vanguard Wellington VWELX
Vanguard Wellesley Income VWINX
Vanguard Dividend Growth VDIGX
Vanguard Primecap VPMAX

I wonder how much of the cause of the outflows is that the owners are dying and their heirs want out and either money or index funds.

Or it's just that people retired and are spending down their assets.

Something like 66% of baby boomers are already retired. The oldest are in their 80s and are doing what many humans in their 80s unfortunately do.

[goingup]

The author offered one explanation for Wellington and Wellesley outflows--they are being replaced in 401Ks by Target Date Funds.

I wonder if the huge dividend and capital gains distributions this year could result in outflows (in taxable accounts) that don't have anything to do with investors fleeing the funds. Wellington's December distributions alone were more than 8%.

[AlwaysLearningMore]

I don't know who wrote the headline asking "should you hold on to these unpopular Vanguard funds?" but whoever did should be ashamed of themselves.

Vanguard Wellington VWELX $114.0B
Vanguard Wellesley Income VWINX $49.3B
Vanguard Dividend Growth VDIGX $50.4B
Vanguard Primecap VPMAX $76.9B

I have never heard it said that you should choose funds based on "popularity." That's even worse than choosing them based on recent past performance. Is the headline a strawman just to give Russell Kinnell the opportunity to contradict it immediately ("absolutely not.")

If a fund had less than about $2 billion one might consider the possibility that it could be closed, merged, or liquidated, and it might be prudent to look for a convenient way to shift to something else.

VWELX is a balanced fund. I suspect it is the largest (and thus "most popular") of all such funds. What would you even compare it with?

Morningstar has an article, The best balanced funds, which provides me with a list. Actually they provide three; I'll use the second, "The best diversified balanced funds," because that's the one they put Wellington in. I used the ticker symbols as given; for Wellington, the result appeared to be the total for all share classes so I hope that's true for all.

T. Rowe Price Balanced RBAIX $4.7B
American Funds Mod Growth & Income BLPEX $14.6B
Vanguard Wellington VWELX $112.3B
T. Rowe Price Spectrum Moderate Allc TPPAX $2.0B
Vanguard LifeStrategy Moderate Gr VSMGX $21.2B
MFS Moderate Allocation MAMAX $6.5B
Dodge & Cox Balanced DOXBX $14.3B
Vanguard STAR VGSTX $22.7B
BlackRock Sustainable Balanced MDCPX $1.6B
PGIM Balanced PIBQX $1.0B
JP Morgan Investor Balanced OIBFX $5.5B
JPMorgan Investor Growth & Income ONGFX $4.8B



"Unpopular."

Thank you for posting this. I had no idea how dominant Wellington really is in terms of assets.

[LadyGeek]

I removed an off-topic interchange regarding humor by Rodney Dangerfield. The discussion was derailed.

Please stay on-topic.

[nisiprius]

...

...

Thank you for posting this. I had no idea how dominant Wellington really is in terms of assets.

To be clear, it is dominant within the category of "balanced funds." But $100 billion is still a big fund by any standard.

[Elysium]

I don't know much about the Primecap fund, back in the day their funds were always closed so I never bothered.

Wellesley and Wellington are the Rodney Dangerfields, especially Wellesley...income?, what's that?

VDIGX has always been a sleeper. My guess is "Dividend" in the name should translate to 4% yield and when they see 1.5% there's a disconnect. But the name is "Dividend Growth" which is just a reflection of earnings growth.

I think the outflows all have to do with performance chasing. Just because the money is moving from active funds into index funds don't mean it isn't performance chasing. These active funds, very similar to what happened in internet bubble, have trailed Mag 7 heavy index funds, therefore their owners finally saw the "light" of index funds hard to beat. The reverse will happen when market takes no prisoners approach in a downturn, as the indexes may then lag. These active funds are conservative, growth at reasonable price or value oriented with less or no weighting to NVDA and so has not kept up with market.

As for Dividend Growth, they don't invest for high dividend yield companies, but companies that have a history of growing dividends consistently - staple names like Microsoft, Apple, United Health, Visa, Mastercard, McDonalds, Coca-cola, Pepsi, J&J, etc. They tend to hold up better in down markets, but trail in up markets. It hasn't done well lately for obvious reasons, but it's all relative, because recently when market was down -1.5%, VDIGX was up about same that day. There's an index version of it in Dividend Appreciation fund (VDADX) that had similar behavior. People selling Tech names go buy some of these staple stocks, money has to go somewhere, it won't always go to cash.

[Elysium]

Those funds are mostly value funds. Don't discount just how much of the outflows are from performance chasing toward US Large Growth Tech stocks. I see signs of performance chasing every day now in emails, blog comments, forum posts etc. There's a lot of it going on right now.

I just said the same thing, before reading this comment. Yes, value oriented and in Primecap case growth at reasonable price, while they invest in Tech and Healthcare heavily, they tend to look for lower prices and so have less allocation to high flying names. IIRC, back when internet bubble burst and all the large growth funds took a hit these Primecap funds held up relatively well, even positive. Not endorsing them, however, to get benefit of any fund be active or index the investors have to stay in it, chasing performance causes them to earn less as we all know.

[random_walker_77]

Is the headline a strawman just to give Russell Kinnell the opportunity to contradict it immediately ("absolutely not.")

Almost certainly so. Have you heard of Betteridge's law of headlines?

"Any headline that ends in a question mark can be answered by the word no."

[Tycoon]

VPMAX is certainly not pummeled.

[Iokruok]

The last time I checked, the Vanguard Primecap fund (VPMAX) was up 4.26% YTD, as compared to the Vanguard 500 index fund (VFIAX), up 2.74% YTD. VPMAX underperformed VFIAX in 2024, but it's too early to say that VPMAX will underperform again this year.

[Hacksawdave]

Wellington refused to get into the AI hype, until the first quarter of 2024, and sibling Wellesley being a balanced fund as well had both funds impacted by rate hikes in the 2022 bond bear. Neither Wellington nor my STAR fund are going to go at any time.

Much like 1999 when some of my funds did not get on the hype wagon, they had outflows and sub-par performance when compared to the popular ones. Then in 2000 Wellington and STAR had over 10% gains while the dotcoms became dotbombs.

[TomatoTomahto]

The last time I checked, the Vanguard Primecap fund (VPMAX) was up 4.26% YTD, as compared to the Vanguard 500 index fund (VFIAX), up 2.74% YTD. VPMAX underperformed VFIAX in 2024, but it's too early to say that VPMAX will underperform again this year.

We have had PRIMECAP for decades. We used to add the annual max ($25k per account, if memory serves), but haven’t done so since moving to Schwab. I don’t follow it closely, but I think it does okay. I surely don’t feel pummeled.

[MadHungarian]

Interesting.
I was actually looking at Wellesley Income recently myself. Looks like a nice fund within its limitations & purpose. But i'm really a passive index person, so it'd take a bit of talking to get me into an active fund.

With Wellington, on the other hand, i thought i saw something there i didn't like -- like some style drift going on maybe? Wellington claims that it focuses on low-multiple value stocks, but when i looked at the current stocks & stats, it looked a current focus on high-multiple growth stocks instead. Anyone else see that, or was i just imagining it? Are the Wellington managers trying to keep up with the Joneses in a Growth world and earn their bonuses?

[Target2019]

Why repost click bait?

Good morning. Is it better to rephrase what is in the link as a general posting to generate the discussion and not include the link? Or is the content in the link not worthy of bringing to people’s attention?

The OP was what's known as a naked link. I think it's generous to describe what's in the article, so that I can decide whether it's worthy of my attention.
Thank you.

[AlwaysLearningMore]

Thank you for posting this. I had no idea how dominant Wellington really is in terms of assets.

To be clear, it is dominant within the category of "balanced funds." But $100 billion is still a big fund by any standard.

Yes, I should have been more clear: dominant within the balanced fund category. But as you say, any fund with $100 billion is a large fund.

[lazydavid]

My wife's IRA (rollover from a previous employer) is comprised entirely of VWENX and VWIAX. It's grown roughly 3x over the 12 years it's been there, with no additional contributions in that time. I'm more than happy with those returns from the most-conservative account in our overall portfolio.

That said, we were part of last year's outflows from Wellington. Shifted about 5% over to Wellesley according to our gilde path.

[yankees60]

To save your time so you don't have to read the link, the funds are actively-managed:
Vanguard Wellington VWELX
Vanguard Wellesley Income VWINX
Vanguard Dividend Growth VDIGX
Vanguard Primecap VPMAX

I wonder how much of the cause of the outflows is that the owners are dying and their heirs want out and either money or index funds.

As an aside ... thank you for showing both the fund name AND its symbol. I'm generally lost when people only use symbols.

[GAAP]

To save your time so you don't have to read the link, the funds are actively-managed:
Vanguard Wellington VWELX
Vanguard Wellesley Income VWINX
Vanguard Dividend Growth VDIGX
Vanguard Primecap VPMAX

I wonder how much of the cause of the outflows is that the owners are dying and their heirs want out and either money or index funds.

As an aside ... thank you for showing both the fund name AND its symbol. I'm generally lost when people only use symbols.

Me too -- that generally means that I ignore the rest.

[sperry8]

VPMAX is certainly not pummeled.

The last time I checked, the Vanguard Primecap fund (VPMAX) was up 4.26% YTD, as compared to the Vanguard 500 index fund (VFIAX), up 2.74% YTD. VPMAX underperformed VFIAX in 2024, but it's too early to say that VPMAX will underperform again this year.

We have had PRIMECAP for decades. We used to add the annual max ($25k per account, if memory serves), but haven’t done so since moving to Schwab. I don’t follow it closely, but I think it does okay. I surely don’t feel pummeled.

Pummeled is a strong word for sure - when a fund like VPMAX has outflows of 4.4% (~$77 billion under management). Quote here https://www.morningstar.com/funds/most- ... tf-flows-2

"Primecap, this is the original Primecap, lost... $3.4 billion over those six months. Primecap Core lost around $950 million, close to a billion dollars over that period. So again, they’re struggling a little bit. This isn’t something that threatens the viability of the funds. These are very big funds, so they can absorb that a little bit, but it is something to keep an eye on, and we’re watching.

And the other important thing with flows is you think about capital gains distributions because a lot of that can trigger managers to have to sell positions. Hasn’t been a big problem so far, but again, something worth keeping an eye on if you are invested in those funds."

But of course what matters to us who are still in it are the potential Cap Gains hits we'll see going forward. VPMAX already pays out large Cap Gains annually - so if these outflows culminate in higher Cap Gains, one may want to prepare. I still buy into VPMAX, but now do so within tax advantaged accts. I still have my original purchases from the 90s and the oughts, which are a substantive part of my folio. So, while it does bear watching, there really isn't anything to be done since I'm sitting on large capital gains since then and am locked in for the ride.