Vanguard’s new mutual funds – Outperformance by design
Tim Huver, Head of Intermediary Sales, Vanguard Investments Canada Inc.
Since introducing our mutual funds in Canada over three years ago, we have seen investors embrace our high-quality and low-cost actively managed mutual funds. While many know us as a leading indexing fund manager, active management has been part of our history for over 45 years and now accounts for $1.7 trillion (USD) of our global assets1. In fact, Vanguard’s active fund family alone is larger than the entire Canadian mutual fund industry.
Canadian investors continue to embrace the opportunities to invest globally in both fixed income and equity markets. The market volatility and subsequent growth we have experienced over the last year has illustrated the benefits of having globally diversified investments in both asset classes. That is why we are excited to add two more global mutual funds to our lineup.
The Vanguard Global Equity Fund and Vanguard Global Credit Bond Fund are global mandates that can provide investors with leading institutional money managers at an industry-leading cost.
We believe these two funds can be used in a variety of ways that are beneficial to an investment portfolio, including as core exposures and as a complement to existing fund holdings.
How Vanguard looks at active management
At Vanguard we believe achieving success in active management is determined by three factors: talent, cost and patience.
In regard to talent, we seek out skilled managers with a process and philosophy that leads to a more reliable outperformance or alpha, for our unitholders. Cost is one of the more reliable indicators of outperformance and our focus on offering high-quality and low-cost investments is enabled by our global size and scale. Perhaps the most important and most difficult aspect to manage is patience. For us, this refers to long-standing relationships with our external fund managers which helps reduce volatility in the funds. Focusing on talent, cost and patience, has resulted in a high percentage of our active funds around the globe outperforming their peer groups over 3-, 5- and 10-year periods2.
Now let’s look at each of our two new mutual funds in greater detail.
Vanguard Global Credit Bond Fund (VIC500)
This is our first active fixed income fund in Canada and is sub-advised by The Vanguard Group, Inc.’s Fixed Income Group, a global team of over 185 dedicated investment professionals specializing in fixed income, overseeing USD $2.1 trillion in total assets. This dedicated team has a 40-year track record in providing deep investment capabilities, disciplined security selection and rigorous risk management techniques to ensure strong long-term performance for investors. This fund will be a true-to-label bond fund that aims to be more predictable by providing diversified sources of alpha – adding outperformance while preserving the diversification benefits of bonds in a portfolio. The fund will have a management fee of 0.40%3.
Vanguard Global Equity Fund (VIC600)
The Vanguard Global Equity Fund i provides a global portfolio that is sub-advised by two leading institutional managers, Baillie Gifford Overseas Limited and Marathon Asset Management Limited. These sub-advisors have worked with Vanguard for decades and collectively manage over USD $500 billion in assets under management.
The Vanguard Global Equity Fund integrates a “best ideas” growth philosophy from Baillie Gifford with a capital cycle approach from Marathon. The maximum management fee for the fund will be 0.55%3.
A depth of active management expertise
Our depth of expertise, approach, and scale enables us to provide a leading investment experience within our active funds, built on the foundational pillars for achieving success over the long-term. It is outperformance by design within a package that can give investors their best chance for investment success.
1 As of July 31, 2021.
2 Only funds with a minimum one-, three- five- or ten-year history, respectively were included in this analysis. Source: Lipper, a Thomson Reuters Company for the period ending 6/30/21. Note that the competitive performance data represents past performance, which is not a guarantee of future results and that all investments are subject to risk.
3 The management fee is equal to the fee paid by the Vanguard fund to Vanguard Investments Canada Inc. and does not include applicable taxes or other fees and expenses of the Vanguard fund.
Important information
Commissions, management fees, and expenses all may be associated with investment funds. Investment objectives, risks, fees, expenses, and other important information are contained in the prospectus; please read it before investing. Investment funds are not guaranteed, their values change frequently, and past performance may not be repeated. Vanguard Funds are managed by Vanguard Investments Canada Inc. and are available across Canada through registered dealers.
This material is for informational purposes only. This material is not intended to be relied upon as research, investment, or tax advice and is not an implied or express recommendation, offer or solicitation to buy or sell any security or to adopt any particular investment or portfolio strategy. Please consult your financial and/or tax advisor for financial and/or tax information applicable to your specific situation.
All investments are subject to risk, including the possible loss of principal. Foreign investing involves additional risks, including currency fluctuations and political uncertainty. This material does not constitute an offer or solicitation and may not be treated as an offer or solicitation in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.
References to "Vanguard" herein are provided for convenience only and may refer to, where applicable, only The Vanguard Group, Inc., and/or may include its affiliates, including Vanguard Investments Canada Inc.