Enduring investments
A leader in active management and indexing
A leader in active management and indexing
Vanguard offers a large variety of high-quality investments at low cost. We manage the assets of many of our funds in-house. In other cases, we entrust Vanguard fund assets to the best outside managers we can find. In every case, our focus is on long-term performance that helps investors achieve their goals.
A client-focused approach
Vanguard funds are better investments by design. We seek to launch only products that have enduring investment merit, fulfill long-term client needs, and offer compelling advantages over competitors.
Video transcript:
Matthew Brancato: An enduring investment idea is one that over the long term improves the chances that an investor will be able to realize their goals. It's good to just start and think about what it is that makes a product enduring in nature and how that separates from the idea of a fad.
Molly Concannon: The questions we ask when launching a product are, one is there an enduring investment merit? We want to launch products that have proven to have and if there's economic rationale for real returns. Two. We look at our business strategy. Three, we look at the needs and preferences of our clients, and four we look at our investment capabilities.
Matthew Brancato: It's one of the areas that we spend a lot of time on is the existing product lineup. So we're not always looking for the next big thing that we think is going to generate a lot of profitability for the firm because that's not how we're organized. That's not who we are.
So from a philosophical standpoint, we really try to keep client needs and preferences at the center of product design, and we carry that all the way through how we steward assets in the context of the ongoing management of our product lineup.
There are aspects of our product lineup that have not changed and will not change. Things like diversification, low cost, focus on the long-term areas like that are really core to who we are and will not change.
Molly Concannon: It's what will make our client successful and given Vanguard structure and our alignments with clients. If our clients are successful, that will make Vanguard successful. That's a real differentiator when you compare Vanguard to competitors.
Active management: Outperformance by design
Active management: Outperformance by design
Three factors distinguish our approach to active management:
Exceptional talent
Our scale and reputation have attracted some of the world’s best money managers to our team.
Discipline
Our patient approach to active management has enabled outperformance over the long term, despite inevitable interim periods of disappointing results.
Unique client alignment
Because our investors are our owners, we can consistently pass along economies of scale and lower the cost of investing, so our investors keep more of their potential returns.* Our built-in cost advantage also helps our portfolio managers avoid unnecessary investment risks.
Video transcript:
Christopher Alwine: Our roots are really an active management. Going back to 1929 with the launch of the Wellington fund. Today we have over $1.3 trillion in active assets in over 70 US based funds.
Arvind Narayanan: For active fixed income process at Vanguard is really built around three key tenets. First, having a long term perspective. Second, is to have diversified sources of alpha, where we're not reliant on a single market risk factor to drive returns in the portfolio. And third, is to have a disciplined approach to risk taking, where our cost advantage gives us that benefit and allows us to be patient and take risk in the market only when the opportunities are there.
Matthew Brancato: Our active funds have outperformed over the last 10 years. We've been able to do that by getting three things right: cost, talent, and patience. We've allowed investors to keep more of their return, we've hired some of the best managers in the world, and we've been patient and allowing that alpha to materialize over a period of time.
Sara Devereux: Our active edge in fixed income investing revolves around compounding alpha. We focus on a diversified set of reliable strategies that are repeatable and scalable, and we don't have an over reliance on large macro bets. In addition, we have a differentiated risk framework that is strengthened by our low fees. This gives us the breathing room to take risk up and down according to the opportunity set and ultimately results in the best risk adjusted returns over time.
Kaitlyn Caughlin: We complement our internal approach with external partnerships. Many investors don't realize the depth of our sub advised active franchise where we actually can complement our internal expertise with expertise that's built in many other firms around the world.
John Ameriks: A lot of the rigor comes in, in the debates that we have a lot of people with very strong academic backgrounds, PhDs in finance, economics, mathematics, a couple of physicists thrown in as well, who bring a variety of different lenses to analyzing whether a model is well-designed, whether it's fit for purpose, and how it fits into all of the pieces of the process.
Sam Priyadarshi: And a typical day my team is looking at portfolios, and our positions, and how they're trending, how the market is trending, they're monitoring geopolitical events, macro events, movements in the marketplace. It's a very fast paced dynamic and fluid workplace.
Gemma Wright-Casparius: We work in conjunction with the investment strategy team so the economists at Vanguard and we define where we see the spectrum of probabilistic outcomes in the marketplace what's our central view, what's our tail risks up and down from that.
Christopher Alwine: Successful investing requires a long term perspective as well as a disciplined approach. So you're going to see a very collaborative environment with a very focused team looking to drive value into the portfolios by identifying those opportunities that make sense to implement.
John Ameriks: We're looking to try to find an insight that others may find harder to uncover or may be not patient enough to take advantage of, and that takes just an awful lot of work and focus and rigor to get right.
94%
Share of our actively managed funds that outperformed their average competitors over the last ten years**
$1.5T
Assets under management
Notes: All data include both mutual funds and exchange-traded funds. The outperformance and asset figures are as of December 31, 2022. The expense figure reflects operating costs for the funds’ fiscal years that ended in 2021.
Sources: Vanguard and Lipper, a Thomson Reuters Company.
Pioneering index funds
Pioneering index funds
We launched the first index fund for individual investors in 1976, and we've been perfecting our indexing capabilities every day since. Low costs benefit our investors. So does our sophisticated approach to benchmark tracking, which lends performance predictability relative to the markets in which the funds invest.
Video transcript:
Rodney Comegys: Vanguard's been doing indexing since the mid-1970s. Really Mr. Bogle made the first index fund for retail investors. From there, we've taken and expanded it. We were the first to offer international indexing, small caps, small company indexing, bond indexing, and emerging markets indexing.
Andy Maack: One of the keys of indexing is low costs which Vanguard is able to do with our structure. So everything that we do. The way that we trade, the way that we think, is always aligned to what is best for our shareholders and best for the portfolios.
Michelle Louie: We manage our entire book of business together as a team. What you'll see is a lot of conversations happening on the floor in real time talking about what is going on in the markets, what's going on in our portfolios, what types of complex actions were trading. So I think the camaraderie and how we work together on the team and with our partners on the floor is actually one of the key ingredients to our clients having a great experience with us.
Andy Maack: Behind me are 25 portfolio managers and traders that are trading on behalf of our index portfolios. We have a domestic team that handles our domestic portfolios as well as an international team that handles the trading portfolio management for our global portfolios. We have traders and portfolio managers all around the globe.
Our portfolio managers here in the US will pass their orders to the different regions to take advantage of liquidity and also have subject matter experts that are Vanguard traders in those regions handling those orders. This allows us to really understand the markets as well as what strategies are best to implement in those markets to make sure we're adding value for our shareholders.
Michelle Louie: We use a combination of value added proprietary trading strategies, but we marry them with an approach that is hyper focused on cost. So every decision I make for our investors' portfolios, I always trade off what is the cost of doing this?
Rodney Comegys: We've worked tirelessly over the years on execution, basically making sure when we have to buy securities we do so at the best price possible for our investors at the lowest possible execution costs. We partner with our index providers and use blockchain as our enabler. It's effectively the engine that lets us communicate and exchange data between ourselves and our index providers and we found that to be a real improvement when it comes to both speed and quality of data.
Michelle Louie: When we look to measure Vanguard index fund performance, we try to trade off essentially three main things. So the first thing we try to look at is tracking error of the risks that we take. The second thing we look to balance alongside risk is cost, and then the third thing that we try to trade off with those other two typically is tax efficiencies.
We are like people sweeping up pennies on the floor. We care about every fraction of a penny every penny we can get because we believe that that's money that belongs to our investors.
77%
0.06%
Average expense ratio, dollar-weighted
Notes: All data include both mutual funds and exchange-traded funds. The outperformance and asset figures are as of December 31, 2022. The expense figure reflects operating costs for the funds’ fiscal years that ended in 2021.
Sources: Vanguard and Lipper, a Thomson Reuters Company.
Learn more about Vanguard investments
Learn more about Vanguard investments
Individuals, institutions, and financial advisors can all benefit from our experience and expertise in both active management and indexing.
Get detailed Vanguard fund information for:
* Vanguard is investor-owned, meaning the fund shareholders own the funds, which in turn own Vanguard.
** For the ten-year period ended September 30, 2022, 6 of 6 Vanguard money market funds, 43 of 44 bond funds, 6 of 6 balanced funds, and 32 of 37 stock funds, (in total, 87 of 93 Vanguard funds), outperformed their peer group averages. Only funds with a minimum three-, five-, or ten-year history, respectively, were included in the comparison. Results for other time periods will vary. Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit vanguard.com/performance.
Source: Lipper, a Thomson Reuters Company.
*** For the ten-year period ended December 31, 2022, 37 of 46 bond funds, 15 of 18 balanced funds, and 110 of 147 stock funds (in total, 162 of 211 indexed Vanguard funds) outperformed the average returns of their peer groups. Only funds with a minimum ten-year history were included in the comparison. Results for other time periods will vary. Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit vanguard.com/performance.
Source: Lipper, a Thomson Reuters Company.
Notes:
Vanguard ETF Shares are not redeemable with the issuing fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
All investing is subject to risk, including the possible loss of the money you invest.
Diversification does not ensure a profit or protect against a loss.
