Wellesley outflows … why?

[RobLIC]

I’ve been aware of both the Wellington and Wellesley outflows for some time. I’m a Wellington fan and confident enough with my decision to invest there that I’m not all that concerned about what other people do. I’d attribute a lot of it to the evidence supporting index funds and the decline in general of active management. At least here!

That said, I was checking outflows for Wellesley (VWINX, VWIAX) and they seem to still continue, though less so than in past years. This surprises me a bit, because it’s 2/3 bonds and I feel like there’s some notion that bonds of varying durations are “more likely” (quotes mine) to see some price appreciation, if for no other reason than reversion to the mean. I do understand that timing the bond market is as fruitless an idea as timing stocks. Still … are there strong reasons why people are still pulling out of traditional (I.e. non-global) Wellesley? Thanks, as always.

P.S. Anyone tossing $3K into Primecap just to maintain access in case it closes again?

[arcticpineapplecorp.]

maybe you're referring to this: https://www.morningstar.com/funds/hang- ... s-outflows

the article says just because there's outflows doesn't mean the fund will suffer.

the fund's long term performance has beaten a 35/65 portfolio in the past.

I wouldn't worry about it if you currently own it, but I index rather than risk underperformance relative to an index.

[RobLIC]

Thank you. I actually had not seen that. But it gels with the graphic that’s visible on M*star when you type in the ticker. I’ve been thinking about starting to shift my dividends/CGs from Wellington over to Wellesley in the idea of eventually landing at 50/50 of each and letting that ride. An alternate, more diversified plan might be 50% Wellington, 50% LS Conservative Growth, just to have some more international as I dial down the stock.

And the alternate alternate plan … don’t just do something. Stand there. But once or twice a year I still fight the urge to tinker. I do want some international, and I’ve wondered if the managers of the 2Ws are less inclined to add international now that there are also actual Global Wellington and Global Wellesley funds, whose purpose is to provide a global balanced fund at the same 65/35 or 35/65 components of the domestic versions.

[Lawrence of Suburbia]

Shouldn't make any difference to people who stick with the two veteran funds, long as Wellington Management sticks to it's proven recipe.

I noticed that article is from 2023, are there still big outflows? I don't see any information on Morningstar about this. (I only get the "free" pages, though).

If this were a secular trend, I *might* get concerned. But the (overwhelmingly unlikely) worst that could happen is, the fund is closed and you get all your money back (to put in another fund or whatever).

Are the Global W's seeing outflows, too? ...

[RobLIC]

Hi. I only get the free Mstar pages, too. I did create the free account. Not sure that matters. Also not sure I can post a screenshot here, because it’s easier to see visually. I’m not referring to the article, but rather the graph present when I type VWIAX into the Morningstar search window, click the name of the fund and scroll down a bit.

The Wellesley outflows have slowed, but still appear “noticeably.” (Please keep in mind, I’m an enthusiast, but there’s a possibility I’m reading it wrong if anyone would like to hack me up.)

To answer your question about the two Global Ws, I looked and the bars for the last few years are so static and minor as to suggest little movement in either direction, which doesn’t surprise me since they’re comparatively new. Incidentally, you also will see consistent and robust inflows into Total Bond the last bunch of years, regardless of interest rate changes the last half decade or so.

[Geologist]

The financial statements associated with the annual and semi-annual reports for the funds will also show the outflows/inflows and in perhaps more detail than Morningstar (e.g., by share class). These used to be part of the annual/semi-annual reports, but with these reports now-streamlined, you have to look online at Vanguard's website to download financial statements separately.

[Hacksawdave]

I’ve been aware of both the Wellington and Wellesley outflows for some time. I’m a Wellington fan and confident enough with my decision to invest there that I’m not all that concerned about what other people do. I’d attribute a lot of it to the evidence supporting index funds and the decline in general of active management. At least here!

That said, I was checking outflows for Wellesley (VWINX, VWIAX) and they seem to still continue, though less so than in past years. This surprises me a bit, because it’s 2/3 bonds and I feel like there’s some notion that bonds of varying durations are “more likely” (quotes mine) to see some price appreciation, if for no other reason than reversion to the mean. I do understand that timing the bond market is as fruitless an idea as timing stocks. Still … are there strong reasons why people are still pulling out of traditional (I.e. non-global) Wellesley? Thanks, as always.

I own the older sister fund Wellington. Twenty-five years ago, it was out of favor as it did not hold dotcoms and other tech darlings of the late nineties. Now it has three factors against it that has put it out of favor once again:

• There are no Nvidia or Tesla shares.
• It did not participate in meme stocks.
• It holds bonds in the fund subject to mark-to-market.

From the 2023 annual report, the amount of net Admiral share reduction in 2023 was 552,828. No concern whatsoever for me as it will remain in the Roth IRA forever. I have been adding shares through the cash dividends from the settlement fund, will perform an exchange after the CG distribution in December, and perform a Roth conversion into the fund next year. I am a buyer in that sense.

While Wellington received static on its lack of participation during the dotcom boom, it made up for it during the ‘lost decade.’ In 2013 Vanguard had to partially close the Wellington fund to specific new accounts as it became the bandwagon.

Both Wellesley and Wellington funds are working as designed and are operating just fine.

[KEotSK66]

VWIAX missed out on recent stock market gains and will likely continue to do so over the next several years.

It's the AA and the lack of aggressive growth.

I now have 90% of my portfolio in VWIAX, 97% up to a week ago when I put the difference in PCRFX...Guilty as charged.

[exodusNH]

I’ve been aware of both the Wellington and Wellesley outflows for some time. I’m a Wellington fan and confident enough with my decision to invest there that I’m not all that concerned about what other people do. I’d attribute a lot of it to the evidence supporting index funds and the decline in general of active management. At least here!

That said, I was checking outflows for Wellesley (VWINX, VWIAX) and they seem to still continue, though less so than in past years. This surprises me a bit, because it’s 2/3 bonds and I feel like there’s some notion that bonds of varying durations are “more likely” (quotes mine) to see some price appreciation, if for no other reason than reversion to the mean. I do understand that timing the bond market is as fruitless an idea as timing stocks. Still … are there strong reasons why people are still pulling out of traditional (I.e. non-global) Wellesley? Thanks, as always.

P.S. Anyone tossing $3K into Primecap just to maintain access in case it closes again?

Part of it could be the result of mass baby boomer retirement.

[Hacksawdave]

The earliest baby boomer born just after 1945 (VE was May of 1945) will turn 80 in 2026. The bulk of true BBs have been taking RMDs already.

I did see this a few days ago on Primecap mentioned by OP:
viewtopic.php?t=442607

[cvn74n2]

If truly concerned, a viable index alternative with near identical results is VTV/VCIT in 35%/65% proportions as mentioned by Vineviz. It matches Wellesley's Large Cap Value / Commercial Bond bias without the active management piece.

[arcticpineapplecorp.]

I own the older sister fund Wellington. Twenty-five years ago, it was out of favor as it did not hold dotcoms and other tech darlings of the late nineties. Now it has three factors against it that has put it out of favor once again:

• There are no Nvidia or Tesla shares.
• It did not participate in meme stocks.
• It holds bonds in the fund subject to mark-to-market.

well Wellington only holds 71 stocks so something's gotta go

[jjunk]

I own the older sister fund Wellington. Twenty-five years ago, it was out of favor as it did not hold dotcoms and other tech darlings of the late nineties. Now it has three factors against it that has put it out of favor once again:

• There are no Nvidia or Tesla shares.
• It did not participate in meme stocks.
• It holds bonds in the fund subject to mark-to-market.

well Wellington only holds 71 stocks so something's gotta go

And NVDA is their third largest holding, so I'm not sure why people think the fund doesn't hold it.

[fsrph]

I own the older sister fund Wellington. Twenty-five years ago, it was out of favor as it did not hold dotcoms and other tech darlings of the late nineties. Now it has three factors against it that has put it out of favor once again:

• There are no Nvidia or Tesla shares.
• It did not participate in meme stocks.
• It holds bonds in the fund subject to mark-to-market.

well Wellington only holds 71 stocks so something's gotta go

The top 10 stocks Wellington owns include Microsoft, Apple, Nvidia, Google, Amazon, Facebook and Broadcom. It does have some tech exposure.

https://investor.vanguard.com/investmen ... file/vwelx

Francis

[LadyGeek]

This thread is now in the Investing - Theory, News & General forum (general discussion).

[firebirdparts]

The earliest baby boomer born just after 1945 (VE was May of 1945) will turn 80 in 2026. The bulk of true BBs have been taking RMDs already.

I did see this a few days ago on Primecap mentioned by OP:
viewtopic.php?t=442607

This is my theory. Think about how many (younger) investors have never heard of these funds. Why would they?

[seajay]

maybe you're referring to this: https://www.morningstar.com/funds/hang- ... s-outflows

the article says just because there's outflows doesn't mean the fund will suffer.

the fund's long term performance has beaten a 35/65 portfolio in the past.

I wouldn't worry about it if you currently own it, but I index rather than risk underperformance relative to an index.

Since 1972 https://www.portfoliovisualizer.com/bac ... TzACJxT30o

[j.click]

Many people have learned (or relearned) the importance of tax efficiency in taxable accounts and have subsequently removed active funds from these accounts. Wellington and Wellesley distribute hefty capital gains most years.

[MnD]

A lot of people believed that bonds were "safe" and/or that bonds went up when stocks went down.
It was a common belief even here.
Also it had been 40 years since the last bear market in bonds ended, so what started in fall 2021 was an absolute shock to them.

They couldn't bail on intermediate term bonds in funds like these so they liquidated/are liquidating for things like T-bills, MM's, short CD's for the fixed income portion of their portfolio. Basically rear-view mirror investing and trading one form of bond risk for another, when bonds with duration risk are a lot more attractive than they were a few years ago.

[tibbitts]

What's the comparison of what's happening with Wellesley fund flows to comparable funds from other companies?

[rkhusky]

well Wellington only holds 71 stocks so something's gotta go

The top 10 stocks Wellington owns include Microsoft, Apple, Nvidia, Google, Amazon, Facebook and Broadcom. It does have some tech exposure.

https://investor.vanguard.com/investmen ... file/vwelx

Francis

Wellington isn’t the Large Value fund that it used to be.

[Hacksawdave]

well Wellington only holds 71 stocks so something's gotta go

And NVDA is their third largest holding, so I'm not sure why people think the fund doesn't hold it.

You are absolutely correct, and I stand corrected. I was looking at an old holding list from 2023 that I saved. The 2023 annual report (still available) made a mention of Nvidia:

The fund’s shortfalls
In the stock portfolio, sector allocation detracted from relative returns, driven by the fund’s underweight to information technology and overweights to health care and energy. Weak security selection in information technology, industrials, and materials also detracted. Top detractors from investment performance included Charles Schwab, Pfizer, Sysco, and Texas Instruments. Not holding NVIDIA during the period also held back relative returns.

Looks like Wellington has been accumulating since the first of the year. The May 2024 SA report listed just over 19M shares and the current holding list now shows 37.3M shares. Yes, even Wellington can decide to jump on a bandwagon and chase performance after the music has played.

[bendix]

Wellesley, if I recall correctly, had a relatively big mid and long-term bond position. Given the current state of fiscal responsibility and uncertainty about future fiscal responsibility, maybe some people dont want to be invested in a fund that holds such. Just guessing of course.

[Hacksawdave]

The earliest baby boomer born just after 1945 (VE was May of 1945) will turn 80 in 2026. The bulk of true BBs have been taking RMDs already.

I did see this a few days ago on Primecap mentioned by OP:
viewtopic.php?t=442607

This is my theory. Think about how many (younger) investors have never heard of these funds. Why would they?

The oldest Gen X turns sixty this coming year and is probably aware of balanced/income funds. Their generation was caught in the middle of the transition from DB plans (think pension) to DC plans (think 401, 403, 457).

Millennials will be post-pension era as their careers started after the IBM cash balance plan Supreme Court decision drove the proverbial final nail into the private pension coffin. Mine was dissolved in 2002. They are reliant upon the DC plans for their future and the oldest Millennials are now past forty, so future AA will come into play. The younger set is not really worried as much about income at this point, but the older set is. I see quite a few posts on income producing assets from 50-somethings frequently.

I could see some of both happening as early BBs did not have as much in funds because of DB plans and will pass down what is left to the younger groups. Some will keep them, some will unload them, and some will transition to them. Balanced/income funds will always have a place and purpose IMO.

[OldSport]

I’ve been aware of both the Wellington and Wellesley outflows for some time. I’m a Wellington fan and confident enough with my decision to invest there that I’m not all that concerned about what other people do. I’d attribute a lot of it to the evidence supporting index funds and the decline in general of active management. At least here!

That said, I was checking outflows for Wellesley (VWINX, VWIAX) and they seem to still continue, though less so than in past years. This surprises me a bit, because it’s 2/3 bonds and I feel like there’s some notion that bonds of varying durations are “more likely” (quotes mine) to see some price appreciation, if for no other reason than reversion to the mean. I do understand that timing the bond market is as fruitless an idea as timing stocks. Still … are there strong reasons why people are still pulling out of traditional (I.e. non-global) Wellesley? Thanks, as always.

P.S. Anyone tossing $3K into Primecap just to maintain access in case it closes again?

Part of it could be the result of mass baby boomer retirement.

I second this. A lot of people in the era where this type of fund was attractive have retired, are retiring, and more are reaching RMD ages. This has been going on for several years and will continue. I hold a small amount in taxable - have not added to it for yeara- and don't want to get dinged with extra capital gains taxes due to this.

[jjunk]

This is my theory. Think about how many (younger) investors have never heard of these funds. Why would they?

The oldest Gen X turns sixty this coming year and is probably aware of balanced/income funds. Their generation was caught in the middle of the transition from DB plans (think pension) to DC plans (think 401, 403, 457).

Millennials will be post-pension era as their careers started after the IBM cash balance plan Supreme Court decision drove the proverbial final nail into the private pension coffin. Mine was dissolved in 2002. They are reliant upon the DC plans for their future and the oldest Millennials are now past forty, so future AA will come into play. The younger set is not really worried as much about income at this point, but the older set is. I see quite a few posts on income producing assets from 50-somethings frequently.

I could see some of both happening as early BBs did not have as much in funds because of DB plans and will pass down what is left to the younger groups. Some will keep them, some will unload them, and some will transition to them. Balanced/income funds will always have a place and purpose IMO.

As a GenX'er myself (51) and recently forcibly retired due to job loss, I can tell you my wife and I both have our entire RIRAs in Wellington. I still think its an excellent fund and have confidence it will continue to perform well for the small ER it charges. I feel like the outflows have more to do with the general increase in investment knowledge that's become readily available via forums such as BH as well as things like YouTube. Meaning, people are taking more control of their investments overall and feel they can do better/same as the W's withouth the added fees. For me, my RIRAs represent a small portion of my overall NW so I am fine with leaving them there for now. If my AA changes due to market conditions, they will also be the first casualty if I need to space to rebalance.

[Padlin]

Looks to me like performance chasing.

[hirlaw]

Also, the managers who ran the fund during its successful years, such as Michael Reckmeyer, are now retired. An active fund is only as good as its managers.

[crefwatch]

Since individual investors are well-known to tend towards "sell-low, buy-high", I don't see why fund outflows would send ME to the exits. And I do remember my mother's stories of the Great Depression. (I mention that because of the psychological aspects of investing.)

[Hacksawdave]

The oldest Gen X turns sixty this coming year and is probably aware of balanced/income funds. Their generation was caught in the middle of the transition from DB plans (think pension) to DC plans (think 401, 403, 457).

Millennials will be post-pension era as their careers started after the IBM cash balance plan Supreme Court decision drove the proverbial final nail into the private pension coffin. Mine was dissolved in 2002. They are reliant upon the DC plans for their future and the oldest Millennials are now past forty, so future AA will come into play. The younger set is not really worried as much about income at this point, but the older set is. I see quite a few posts on income producing assets from 50-somethings frequently.

I could see some of both happening as early BBs did not have as much in funds because of DB plans and will pass down what is left to the younger groups. Some will keep them, some will unload them, and some will transition to them. Balanced/income funds will always have a place and purpose IMO.

As a GenX'er myself (51) and recently forcibly retired due to job loss, I can tell you my wife and I both have our entire RIRAs in Wellington. I still think its an excellent fund and have confidence it will continue to perform well for the small ER it charges. I feel like the outflows have more to do with the general increase in investment knowledge that's become readily available via forums such as BH as well as things like YouTube. Meaning, people are taking more control of their investments overall and feel they can do better/same as the W's withouth the added fees. For me, my RIRAs represent a small portion of my overall NW so I am fine with leaving them there for now. If my AA changes due to market conditions, they will also be the first casualty if I need to space to rebalance.

In my case Wellington represents just 2.7% of the portfolio and 35% of the Roth IRA. I only need eleven funds split between the three account types, with taxable having five with the municipal funds. I mostly agree with the point you made about people taking on a more active role in choosing their investments. I started my position at age 38 and still have it at age 60 plus. It serves a purpose for me and sounds like it does for you as well.

While some will take the path of a few simple funds versus an advisor’s 40-fund and 40-stock boondoggle, they sometimes take the cookie-cutter approach on their retirement funds and use TDFs. I have managed funds in the portfolio, but these are in balanced and bond funds. Pure equity I keep in the index funds.

[dcop]

Since retiring my 6.5 year total return on Wellesley is 37.5%. Wellington is 62% and change. Being that they are in pre-tax accounts I have no intention of pulling out regardless if others do.

[Lawrence of Suburbia]

I'll admit that Wellington buying Nvidia after it's big run-up concerns me a bit; that's not why I would own Wellington or Wellesley. I own Wellesley (and would own Wellington) for their relatively conservative, steady, wide-moat equities. Yes, Wellington's got other tech stocks, but they're relatively 'blue chip' by tech standards (e.g. Microsoft, Google, Amazon). Wellesley is still a bit boring, for which I'm grateful.

Pity Jack Bogle isn't around to gently remind Wellington's managers of their historical mission.