Also some advice on how to avoid buying the distribution this year.
The recent subadvisor shuffle at Vanguard Morgan Growth
Just before Thanksgiving Vanguard announced it had added two new managers to Morgan Growth, booting a veteran subadvisor in the process. Frontier Capital Management and Kalmar Investment Advisors joined the effort, while Franklin Portfolio Associates, which had run a slice of the fund for more than 18 years, departed.
I don't know a lot about Frontier Capital, other than the Frontier Mid Cap separate account run by the manager who will work on Morgan Growth, Stephen Knightly, has a strong record against similar separate accounts, mid-cap indexes, and the typical open-end mid-cap growth fund over the past three years. Kalmar is a known quantity. It has managed a portion of Vanguard Explorer for three years and has a decent long-term record at Kalmar Growth-with-Value Small Cap
It's always a good idea to keep an eye on a fund that gets a new manager, even a fund with multiple subadvisors like Morgan Growth. But there are no initial signs these managers, who will share 20% of Morgan Growth's assets, will foul the fund, which is also run by Wellington Management, Jennison Associates, and Vanguard's Quantitative Equity Group.
Ironically enough, the Morgan Growth changes may mean it's time to keep close watch on another fund: Vanguard Growth & Income
When Vanguard hired AXA Rosenberg, for instance, to run half of U.S. Value
No one likes to buy a distribution. That's when you buy a mutual fund right before it pays a dividend or capital gains distribution, putting you in the dubious position of owing taxes on appreciation that you were not in the fund long enough to appreciate. That's why it pays to pay attention to fund families' capital gains distribution estimates this time of year.
When Vanguard issued preliminary capital gains distribution estimates for its mutual funds early in November, it looked like 16 funds would make payouts, some of them quite large, before the end of 2008. Revised distributions released since then indicate fewer funds will hand out gains than originally thought and those that do will make smaller payments to shareholders.
As of the end of November, 11 Vanguard funds will make capital gains distributions to shareholders. Precious Metals and Mining
Other good funds expected to make distributions of 5% of NAV or more include the closed Capital Opportunity
Only Health Care and Market Neutral
Funds that don't look like they will make a distribution at all now include Institutional Total Bond Market Index
The record date, or the day on which you have to own the fund to be eligible for the distribution, for most of the funds is Dec. 15. The record date is Dec. 29 for Diversified Equity, Market Neutral, and STAR
Daniel Culloton is senior fund analyst with Morningstar.