Executive Summary: About 60% of Vanguard’s in-house portfolio managers have money invested in their own funds (which means 40% do not), but a meaningful stake remains the exception. The outside firms behind Vanguard’s flagship active funds, like PRIMECAP and Wellington, set a much higher bar.
Active portfolio managers with significant stakes in the funds they run are the exception, not the rule, at Vanguard. In my view, that’s not a good look.
The most notable exception: Every one of PRIMECAP’s five portfolio managers reports more than $1 million invested in each of the three Vanguard funds they run: PRIMECAP (VPMCX), Capital Opportunity (VHCOX) and PRIMECAP Core (VPCCX).
Among Vanguard’s own 45 portfolio managers, exactly one, Michelle Louie, reports more than $1 million in a single fund. Eighteen report nothing at all.
That’s a pretty big gap. It’s narrower than last year, when more than half of Vanguard’s managers had $0 in the funds they run. But it’s still wide.
Each year, I dig through Vanguard’s ownership disclosures to answer a simple question: Are the portfolio managers you and I put our money, and our faith, in eating their own cooking? Here’s what I found.
Why It Matters
Like clockwork, every year at least one IVA reader will ask: Why should we care how Vanguard’s portfolio managers invest?
Fair question. Plenty of reasonable explanations exist for a manager not owning the fund they run. A bond manager may prefer stocks in their personal account. A sector specialist may want diversification outside their narrow lane. An indexer whose name is on 20-plus funds can’t own them all. (Well, actually they could—and in my view they should—own at least a token amount to show faith in their strategies.)
You might also expect that job security alone would push most managers to do their best.
Still, I’m convinced ownership is relevant. It’s a virtual given that when fund managers evaluate stocks, they look for executives with “skin in the game.” Vanguard’s proxy team preaches the same thing about aligning incentives. So why shouldn’t we expect the same of Vanguard’s own portfolio managers?
Where the Numbers Come From
A word on the data before we dig in.
Vanguard is required to disclose manager ownership only once a year, piecemeal, as each fund’s regulatory paperwork is renewed. And the reporting isn’t precise, showing only broad bands of ownership:
- $0
- $1–$10,000
- $10,001–$50,000
- $50,001–$100,000
- $100,001–$500,000
- $500,001–$1,000,000
- over $1 million
That’s it. No share counts and no dates of purchases or sales. Corporate CEOs and CFOs must disclose exactly how many shares they own and when they trade. Why shouldn’t fund managers be held to the same standard?
At the very least, Vanguard could make its required disclosures easy to find. Since it won’t, I do the work for you.
If you are looking for specifics, I’ve pulled the latest figures for every Vanguard fund and portfolio manager, including the outside firms Vanguard hires, into one place here. Last week’s update on Vanguard’s trustees covers the people overseeing our funds. That picture wasn’t that pretty, either.
A few notes on method: I count the LifeStrategy series as one fund and the Target Retirement series as another. I exclude funds launched this calendar year.
The Vanguard Employee Scorecard
So how do Vanguard’s own managers measure up? Better than last year, but still not well.
For the chart below, I took the largest stake each Vanguard manager reports in any one fund they run or co-run. Then I grouped the managers by disclosure band.