Growth v. value in two Vanguard active international funds

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nisiprius
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Growth v. value in two Vanguard active international funds

Post by nisiprius »

Just stirring the pot. To be clear, I don't hold any active stock funds myself, don't tilt toward growth or value, and don't intend to.

The actively-managed Vanguard International Growth Fund, VWIGX, had a return of 53.60% for the year ending 8/31/2020, and 32.86% year-to-date.

The strategy and policy statement begins "The fund invests in the stocks of companies located outside the United States," but the top ten holdings include "Tesla, Inc." and "Amazon.com Inc." Go figure.

Here, International Growth plotted with International Value and the passive, untilted Total International fund.

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Last edited by nisiprius on Wed Sep 16, 2020 8:03 am, edited 2 times in total.
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Re: Growth v. value in two Vanguard active international funds

Post by Brianmcg321 »

I don’t like their international growth fund simply because they have us companies in it. Their short term return can be completely attributed to Tesla and Amazon.
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Re: Growth v. value in two Vanguard active international funds

Post by nisiprius »

Morningstar can take us back to 1983. I wonder if these are the original fund names, and what "growth" and "value" really meant back then?

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Re: Growth v. value in two Vanguard active international funds

Post by JoMoney »

Defining "international" can be a funny thing. Indexes have different methodologies and even committees trying to disambiguate their own rules.
There are stocks in Vanguard's S&P 500 fund that are in Vanguard's "Total International" fund.

It's been awhile since I tried to search for them, there used to be a handful of such stocks, right now the only example I can find is
Amcor plc
Last edited by JoMoney on Wed Sep 16, 2020 8:19 am, edited 1 time in total.
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Re: Growth v. value in two Vanguard active international funds

Post by sycamore »

There's some daylight between Growth and Value starting in late 2015, by mid 2017 it's opened up a bit more, by late 2019 it was rather wide and of course in 2020 it got even bigger.

The last few years difference in Intl (Growth and Value) mirrors that in US. So a combo of the strong growth tilt plus the presence US-based companies (Tesla & Amazon) seems to explain things.

(I don't own any active Intl funds.)
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Re: Growth v. value in two Vanguard active international funds

Post by nisiprius »

JoMoney wrote: Wed Sep 16, 2020 8:10 am Defining "international" can be a funny thing. Indexes have different methodologies and even committees trying to disambiguate their own rules.
There are stocks in Vanguard's S&P 500 fund that are in Vanguard's "Total International" fund.

It's been awhile since I tried to search for them, there used to be a handful of such stocks, right now the only example I can find is
Amcor plc
More than a handful, the S&P 500 includes something like a dozen, maybe fifteen stocks of companies domiciled outside the US.
Domicile. Only common stocks of U.S. companies are eligible. For index purposes, a U.S. company has
the following characteristics:

1. Files 10-K annual reports.

2. The U.S. portion of fixed assets and revenues constitutes a plurality of the total, but need not exceed 50%. When these factors are in conflict, fixed assets determine plurality. Revenue determines plurality when there is incomplete asset information. Geographic information for revenue and fixed asset allocations are determined by the company as reported in its annual filings.

3. The primary listing must be on an eligible U.S. exchange as described under Exchange Listing below.
If criteria #2 is not met or is ambiguous, S&P Dow Jones Indices may still deem it a U.S. company for index purposes if its primary listing, headquarters and incorporation are all in the U.S. and/or a “domicile of convenience” For further information on domiciles of convenience, please refer to S&P Dow Jones Indices’ Equity Indices Policies & Practices Methodology.

In situations where the only factor suggesting that a company is not a U.S. company is its tax registration in a “domicile of convenience” or another location chosen for tax-related reasons, S&P Dow Jones Indices normally determines that the company is still a U.S. company.

The final determination of domicile eligibility is made by the Index Committee which can consider other factors including, but not limited to, operational headquarters location, ownership information, location of officers, directors and employees, investor perception and other factors deemed to be relevant.
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Re: Growth v. value in two Vanguard active international funds

Post by 000 »

Another vote for active management? :shock:
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Re: Growth v. value in two Vanguard active international funds

Post by tibbitts »

nisiprius wrote: Wed Sep 16, 2020 8:06 am Morningstar can take us back to 1983. I wonder if these are the original fund names, and what "growth" and "value" really meant back then?
I seem to recall reading a very long time ago, maybe a post on Morningstar (Diehards) before this forum spun off, where someone was complaining that the Vanguard Growth and Value funds were identical in the majority of top-ten holdings. So I think growth and value has had a loose definition for a while in active management land.
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Re: Growth v. value in two Vanguard active international funds

Post by asif408 »

It looks like Vanguard's int'l value fund has actually had the same performance as DFA's int'l value fund since the mid 1990s, although the paths to get there were different: https://www.portfoliovisualizer.com/fun ... mark=DFIVX

It looks like the Vanguard int'l value fund is less "valuey" than DFAs. It fell more during the bursting of the tech bubble and went up less during the ensuing bull market in value stocks. And it also fell less than the DFA fund during the last 2 1/2 years when value stocks significantly underperformed. A quick comparison in Morningstar shows the Vanguard fund has much more cash (6% vs. <1% for DFA, typical of an active fund) and is larger and less value oriented. So if I wanted to tilt value it doesn't look like the Vanguard fund catches much of the upside.

As far as the Vanguard int'l growth fund, to me that's a wolf in sheep's clothing. By pretty much any valuation metric it is more expensive than the US stock market, which is saying something, given how poorly international stocks have fared over the last decade compared to US stocks. As you say, it owns Tesla and Amazon, and quite surprisingly it has a similar sector composition to QQQ, with large positions in communications, consumer cyclical, and tech. What should be concerning to investors thinking they are getting some sort of international diversification benefit is that its performance has been remarkably similar to QQQ in the last year, beating the US stock market and handily beating the international stock market. I'd be wary of an international fund whose performance is behaving similar to QQQ and is outperforming the US stock market.
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Re: Growth v. value in two Vanguard active international funds

Post by occambogle »

VWIGX/VWILX has done really well this year. VWILX is 30% of my 401k representing all my international exposure in the 401k - but not so much by deliberate choice, more that the other international options available to me were all obscure and unappealing. But I can't complain given the performance... over the last year it has done almost as well as the US Growth active fund VWUAX, which for something containing 85-90% international is pretty impressive.

https://stockcharts.com/h-perf/ui?s=VWI ... 2047687469

Regarding the US-domiciled companies.. yes it is a bit odd I agree and think they could do a better job of making that clear... but US exposure seems limited to around 10-15%. To be fair their prospectus says:

"The Fund invests predominantly in the stocks of companies located outside the United States and is expected to diversify its assets in countries across developed and emerging markets. In selecting stocks, the Fund’s advisors evaluate foreign markets around the world and choose large-, mid-, and small-capitalization companies considered to have above-average growth potential."

...although I have to say I didn't notice that when I bought into it. Although I can live with it. I assume the logic is that these companies have significantly high international revenue overseas so as to be considered as exposure to those markets.

There's some existing threads for those who are interested:
viewtopic.php?t=322743
viewtopic.php?t=316563
viewtopic.php?t=311908
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Re: Growth v. value in two Vanguard active international funds

Post by Angst »

JoMoney wrote: Wed Sep 16, 2020 8:10 am Defining "international" can be a funny thing. Indexes have different methodologies and even committees trying to disambiguate their own rules.
There are stocks in Vanguard's S&P 500 fund that are in Vanguard's "Total International" fund.

It's been awhile since I tried to search for them, there used to be a handful of such stocks, right now the only example I can find is
Amcor plc
This fund has over 10% of its portfolio in just Tesla, Amazon and Spotify, even though investing in US stocks is explicitly in contradiction to VWIGX's strategy and policy statement, which begins with:
Vanguard VWIGX wrote:
Investment strategy

The fund invests in the stocks of companies located outside the United States. In selecting stocks, the fund’s advisors evaluate foreign markets around the world and choose companies with above-average growth potential. The fund uses multiple investment advisors to manage its portfolio.
Vanguard ought to update ("correct") the strategy and policy statement and rename the fund the "Vanguard Global Growth Fund" or the "Vanguard World Growth Fund". From a Vanguard USA perspective, "International" in this instance is a blatant misnomer.
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Re: Growth v. value in two Vanguard active international funds

Post by occambogle »

Angst wrote: Wed Sep 16, 2020 10:31 am
This fund has over 10% of its portfolio in just Tesla, Amazon and Spotify, even though investing in US stocks is explicitly in contradiction to VWIGX's strategy and policy statement, which begins with:
It's weird, because some of their documentation does say "predominantly", see page 4 in the doc below, as do many of the 3rd party brokerage websites such as Yahoo:

https://advisors.vanguard.com/pub/Pdf/sp81.pdf

Perhaps they updated it at some point. In any case I definitely do think they should be clearer about that. Personally, I'm fine with that relatively low level of exposure to US companies that have significant international exposure... but I agree investors should be more clearly warned of this fact.
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Re: Growth v. value in two Vanguard active international funds

Post by rascott »

Angst wrote: Wed Sep 16, 2020 10:31 am
JoMoney wrote: Wed Sep 16, 2020 8:10 am Defining "international" can be a funny thing. Indexes have different methodologies and even committees trying to disambiguate their own rules.
There are stocks in Vanguard's S&P 500 fund that are in Vanguard's "Total International" fund.

It's been awhile since I tried to search for them, there used to be a handful of such stocks, right now the only example I can find is
Amcor plc
This fund has over 10% of its portfolio in just Tesla, Amazon and Spotify, even though investing in US stocks is explicitly in contradiction to VWIGX's strategy and policy statement, which begins with:
Vanguard VWIGX wrote:
Investment strategy

The fund invests in the stocks of companies located outside the United States. In selecting stocks, the fund’s advisors evaluate foreign markets around the world and choose companies with above-average growth potential. The fund uses multiple investment advisors to manage its portfolio.
Vanguard ought to update ("correct") the strategy and policy statement and rename the fund the "Vanguard Global Growth Fund" or the "Vanguard World Growth Fund". From a Vanguard USA perspective, "International" in this instance is a blatant misnomer.

Well, Spotify is a Swedish company.
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Re: Growth v. value in two Vanguard active international funds

Post by rascott »

One of only a couple actively managed funds I still own is a Columbia Threadneedle fund, Acorn Intl. It continues to beat the international index seemingly every year. That said, it's more of a mid- cap growth style fund, so guess I shouldn't be surprised.
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Re: Growth v. value in two Vanguard active international funds

Post by Angst »

occambogle wrote: Wed Sep 16, 2020 10:42 am
Angst wrote: Wed Sep 16, 2020 10:31 am
This fund has over 10% of its portfolio in just Tesla, Amazon and Spotify, even though investing in US stocks is explicitly in contradiction to VWIGX's strategy and policy statement, which begins with:
It's weird, because some of their documentation does say "predominantly", see page 4 in the doc below, as do many of the 3rd party brokerage websites such as Yahoo:

https://advisors.vanguard.com/pub/Pdf/sp81.pdf

Perhaps they updated it at some point. In any case I definitely do think they should be clearer about that. Personally, I'm fine with that relatively low level of exposure to US companies that have significant international exposure... but I agree investors should be more clearly warned of this fact.
Thanks for finding that. I have to imagine the SEC would prefer that fund companies roll out changes to fund strategies, policies, etc all at once with respect to the various information sources these fund companies have for providing this kind of information to current and prospective customers. But given what you've found, which should take precedence: a Vanguard summary prospectus pdf online or a Vanguard fund webpage "Strategy and policy" statement? Just a rhetorical question, of course they ought to be consistent with each other. Vanguard's webpage is incorrect and misleading to potential investors. Not good! Bad Vanguard.
:oops:

rascott wrote: Wed Sep 16, 2020 10:45 amWell, Spotify is a Swedish company.
Well, you caught me there. I didn't know that, thank you.
Still this doesn't significantly affect the point I make above.
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Re: Growth v. value in two Vanguard active international funds

Post by jimkinny »

I wish I knew then what I know now.
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Re: Growth v. value in two Vanguard active international funds

Post by Doc »

nisiprius wrote: Wed Sep 16, 2020 7:56 am Just stirring the pot. To be clear, I don't hold any active stock funds myself, don't tilt toward growth or value, and don't intend to.
Just stirring the pot. To be clear, I do hold an active stock fund myself, do tilt, and intend to continue. :D

Source: https://www.portfoliovisualizer.com/fun ... sisResults

Image
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Re: Growth v. value in two Vanguard active international funds

Post by occambogle »

Unless I’m missing something that graph could do with a key as to what color is what, also the PV link doesn’t work
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Re: Growth v. value in two Vanguard active international funds

Post by Doc »

occambogle wrote: Wed Sep 16, 2020 4:52 pm Unless I’m missing something that graph could do with a key as to what color is what, also the PV link doesn’t work
Sorry about that. Nisi doesn't use active funds and I don't use portfolio visualizer. :D

I used Nisi's link and substituted ARTKX for his Vanguard fund.

You can tell which is which by matching the final values.
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Re: Growth v. value in two Vanguard active international funds

Post by Robert T »

.
Ah. Now that we are all choosing actively managed international value funds. Here are 2 more.

Tweedy Browne Global Value (Graham and Dodsville) [TBGVX]
First Eagle Overseas [SGOVX]

https://www.portfoliovisualizer.com/bac ... ion3_3=100
.
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Re: Growth v. value in two Vanguard active international funds

Post by typical.investor »

Doc wrote: Wed Sep 16, 2020 4:24 pm
nisiprius wrote: Wed Sep 16, 2020 7:56 am Just stirring the pot. To be clear, I don't hold any active stock funds myself, don't tilt toward growth or value, and don't intend to.
Just stirring the pot. To be clear, I do hold an active stock fund myself, do tilt, and intend to continue. :D

Source: https://www.portfoliovisualizer.com/fun ... sisResults

Image
Vanguard Growth is blue
Artisan Value is red
Vanguard Total Intl is yellow.
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