Vanguard Fires AllianceBernstein at U.S. Growth Fund

Vanguard finally decided it was time to intervene at the woeful Vanguard U.S. Growth VWUSX.

In an effort to turn around more than a decade of futility, Vanguard has replaced AllianceBernstein AB, one of the two subadvisors of U.S. Growth, the family's worst-performing equity fund over the trailing 10- and 15-year periods ended Oct. 6, 2010. While the other subadvisor, William Blair & Company, remains, the manager assigned to that firm's portion of the fund is changing, too.

Wellington Management and Delaware Investments will split the portion of the $3.7 billion portion of U.S. Growth fund that AllianceBernstein had run since 2001. At least initially, Wellington, Delaware, and William Blair will each run one third of the fund.

Andrew Shilling, who has run the Hartford Growth HGWAX fund for nearly a decade, will run Wellington's slice of the fund. If his strategy at Hartford Growth is any guide, Shilling will pick 50 to 80 large-cap stocks that he thinks have above-average growth prospects. He won't pay much attention to index sector weightings and will turn his slice of the portfolio over close to once a year. The approach has been relatively successful at Hartford Growth. From Shilling's April 2, 2001, start through Oct. 6, 2010, Hartford Growth's 1.5% annualized gain edged the typical large-growth fund and the Russell 1000 Growth Index, albeit with above-average risk.

A well-traveled team from Delaware US Growth DUGAX, lead by veteran Jeff Van Harte, will steer Delaware's third of the fund. The squad follows a lower-turnover, more concentrated, and valuation-conscious approach that typically assembles a portfolio of 25 to 35 stocks with strong competitive advantages and cash flows. The fund has turned in mixed results since Van Harte and company arrived in April 2005. Its 2.9% annualized gain through Oct. 6, 2010, lags the Russell 1000 Growth's 3.3% advance but beats the typical large-growth fund's 2.4% gain.

The Delaware team, which includes Daniel Prislin, Christopher Bonavico, and Christopher Ericksen, has achieved better absolute and relative results at the mid-cap-focused Delaware Select Growth DVEAX. It also beat the typical large-cap growth fund and Russell 1000 Growth Index in seven years from 1998 to 2005 at the old Transamerica Premier Equity, which was merged away in 2009.

In the William Blair portion of the fund, James Golan and Tracy McCormick, who have been with the firm since the early 2000s, will take over from John Jostrand when he steps down at the end of the year. Jostrand has run about a third of U.S. Growth since April 19, 2004, but is going to focus on his other fund, William Blair Growth WBGSX. The firm telegraphed this change in a filing earlier this year.

Vanguard removed AllianceBernstein due to an ''accumulation of circumstances,'' said Dan Newhall, head of the family's portfolio review group that selects and monitors active managers. Newhall would not enumerate those circumstances, but AllianceBernstein and its large-cap growth team in particular have been in flux in recent years. There have been numerous manager changes on AllianceBernstein's slice of the fund, most recently the June 30, 2010, retirement of Jim Reilly after just two years at U.S. Growth. There also has been turnover in the analyst and executive ranks at the firm, as well as continual tinkering with the tools and methods of its growth research effort.