Yes it did surprise me that they added another subadvisor so soon - and it looks like Vanguard's really trying to spreadout the workload here. I was surprised too because lately there hasn't been a flood of money flowing into Global funds in general -- in fact, PGVFX (Polaris Global Value) has gone from over $900m to under $500m in about a year's time during a difficult investing environment.
VHGEX has a value tilt as seen on M*'s xray and also from Vanguard:
And in reading the latest comments last year from all 3 of the then subadvisors -- they all were valuation-minded or value-conscious in evaluating stocks for inclusion.
Here's also what Vanguard says of Baillie Gifford Overseas in their investment approach:
"The firm’s investment approach is based on long-term investments in well-researched and well-managed businesses that enjoy sustainable competitive advantages in their marketplaces. In managing its portion of the fund’s assets, the firm employs a fundamental “bottom up” approach to identify growth companies, screening them for quality, then value. The main factors considered are sustainable earnings growth, cash-flow generation, profitability, interest coverage, and valuation."
And although the firm is also a subadvisor to the Vanguard International Growth, the actual guys they've assigned to co-manage VHGEX are different from the current guys co-managing the International Growth fund.
As AJ noted -- the 3 guys of Baille Gifford assigned to VHGEX are involved with their own Global Alpha Fund. In this pdf link on their Global Equities bulletin -- you can not only read about their general comments on Global equities but also on Page 3 you can read comments on the Global Alpha Fund:
http://www.bailliegifford.com/documents/59629_Global%20Equities%20H1%202007.pdf
Excerpt:
"A small team filters the buy and sell recommendations generated around the firm by considering them in a genuinely global context, to create a relatively concentrated ‘best ideas’ portfolio.
There is a tremendous freedom in managing portfolios in a genuinely global manner. This presents a broad range of investment opportunities, indeed if anything we have found our research teams produce too many good ideas. Moreover, the fact that a global index is well diversifi ed (the biggest company in the world represents less than 2%) is a positive factor as, with no sizeable underweight positions to worry about, we can focus our energies on those stocks we hold and on the more interesting companies in our investment universe.
The combination of our stock picking approach and a global remit has also broadened the investment opportunities. We look for the best companies in terms of their future prospects and market valuation, regardless of where they are located or listed."
My guess is that Vanguard seems to want to not only diverse the investment team but also the strategy. It appears that Baillie Gifford's approach is more growth-oriented than the existing 3 managers who appear to currently keep the fund overall's balance tilted in the value space.
If you look at the number of stocks VHGEX holds as well as the country diversification -- you will say whoaa -- this is very index like. In sense that is true but on the on the other hand when I look at the top 50 stocks or even top 100 stocks, it doesn't resemble the index at all. In the long-term, if the World index does 7.5% then you can maybe and hopefully expect 9.5% in VHGEX by mgmnt tweaking the country weighting and not letting growth runaway too far into bubble territory by shifting a bit to value plays while at the same time remaining almost as regionally diversified as the world index. But you're not going to get blowout returns.
But here's the problem too with other funds -- sometimes they'll provide blowout returns for 3-5 years but then once investors get a whiff of 2 yrs of bad underperformance, they head for the exits.
I still like VHGEX very much especially in a tax-deferred account. I might be willing to do half VHGEX + half OAKGX but there's no way I personally would put everything on more concentrated options like OAKWX or OAKGX.
MGLBX (Marsico Global) is interesting but I don't think their growth-oriented style is my style. Investors will flock to it as it will do well here and there but long-term they don't fit my style.
RIVFX (Royce Global Value) fund - holds around 50 stocks - is an interesting one as it is mainly smallcap and offers a very different investing style from most Global funds and thus has performed quite differently from all others the past year.
...to be continued...
