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An inside look at Vanguard Investment Management Group

July 06, 2017

From modest beginnings decades ago, when portfolio managers kept track of positions on index cards, Vanguard Investment Management Group has evolved into one of the largest asset managers in the world.

Today, across three continents, this group manages more than $3 trillion in assets and employs more than 400 investment professionals.

The work gets done in a highly collaborative manner that encourages a wide range of opinions and minimizes overdependence on any individual. "Vanguard leaders and portfolio managers are constantly learning and growing, which results in a deeper understanding of the markets, our funds, and our operations," said Tim Buckley, Vanguard's chief investment officer. "We believe in synergy, not silos."

The overriding goal for the group is to use the breadth and depth of Vanguard's global investment, risk management, and investment strategy teams to provide superior investment results for our more than 20 million clients worldwide. To achieve that, the group is organized into several functional units, each fulfilling core responsibilities.

Vanguard's equity management at a glance

Number of stock funds and ETFs managed: More than 183 mandates globally

Number of equity investing professionals: More than 100 globally (29 CFA® charterholders, 45 with MBAs or other graduate degrees, 7 with Ph.D.s)

Locations: 5 global sites—London; Melbourne; Scottsdale, Arizona; Toronto; and Valley Forge, Pennsylvania.

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Equity Index Group

The Equity Index Group manages all of our domestic and international stock index funds and ETFs. It's responsible for the world's first index mutual fund, Vanguard 500 Index Fund, introduced in 1976. This unit also manages the world's largest mutual fund, Vanguard Total Stock Market Index Fund, which has assets of almost $500 billion.

The index group benefits from these advantages:

  • Global reach: Vanguard trading hubs are spread across the globe—in Pennsylvania, London, and Melbourne—to allow trading coverage in all major market centers.
  • Trading expertise: Each Vanguard trader understands the nuances of regional markets, has contacts with local brokers, and possesses deep knowledge about the structure of markets.
  • Lower costs: Vanguard portfolio managers in each region can lower costs for fund investors as they share and leverage global execution expertise and scale.

Quantitative Equity Group

The Quantitative Equity Group manages a family of quantitative funds and ETFs in the United States and abroad, as well as portions of our active multimanager equity products. (Vanguard also employs outside advisors for many of its actively managed stock funds and some of its bond funds.)

The group has employed a fundamentally driven and systematically implemented investment process for more than 25 years. Its product offerings have expanded to include more than 35 portfolios with more than $30 billion in assets. That includes our first factor fund, Vanguard Global Minimum Volatility Fund, launched in 2013, and a number of recently added factor funds in Canada and the United Kingdom.

In addition to managing assets, the Quantitative Equity Group continually does research to create new models and to update existing ones with the aim of improving client returns, minimizing volatility, and lowering costs.

Vanguard's fixed income management at a glance

Number of bond funds and ETFs managed: 65

Number of fixed income professionals: More than 150 (71 CFA charterholders, 73 with MBAs, 4 with Ph.D.s)

Locations: 5 global sites—London; Melbourne; Scottsdale, Arizona; Toronto; and Valley Forge, Pennsylvania.

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Fixed Income Group

This group is responsible for all Vanguard fixed income funds managed internally, including U.S. and international funds using active and index strategies.

Vanguard got its start in fixed income management with money market funds in the early 1980s. In 1986, we launched the world's first bond index mutual fund, Vanguard Total Bond Market Index Fund. Today, that fund is the largest of its kind, with assets of about $170 billion.

In the past three decades, we've launched more than 40 bond funds to meet investor demand for broad market coverage as well as for specific needs related to duration, credit quality, and market segmentation. The product lineup now spans taxable bond funds and ETFs, municipal bond funds, and money market funds.

Portfolio management is a team effort, and that's especially evident in the active taxable and tax-exempt fixed income funds' "hub and satellite" approach. The senior strategy group, or hub, sets out a common operating framework regarding the macroeconomic outlook, duration and yield curve positioning, credit risk, and sector allocations. Joe Davis, Vanguard's global chief economist, provides the economic perspective that helps set strategy for the funds.

Then, satellite teams made up of portfolio managers, credit analysts, and traders, in consultation with rate strategists, use the framework to build and manage the portfolios in a bottom-up manner that focuses on individual securities.

And when it comes to international fixed income investing, many of our bond funds with international exposure take advantage of the group's large-scale foreign exchange capability to hedge the effects of currency fluctuation.

Hundreds of professionals, one mission

The Vanguard "crew" working in the Investment Management Group play many different roles, but they are united by a commitment to give our clients the best chance for investment success, according to CIO Buckley.

"It all comes down to great people," he said. "Our philosophy is to always have the best team on the field and make sure we have a wealth of talent coming in behind them. People are our priority, because if you have the talent, we believe the shareholder will be well taken care of."

Notes:

  • All figures are as of December 31, 2016, unless otherwise noted.
  • 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. Bonds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer's ability to make payments.
  • Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. 

CFA® is a registered trademark owned by CFA Institute.

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