Five Surprising Vanguard Fund Statistics
Datapoints that make you think twice about some Vanguard funds.
Datapoints that make you think twice about some Vanguard funds.
If you spent as much time researching one mutual fund family as I do, you could find yourself with a lot of datapoints that may not make it into an analysis, article, or even polite conversation. Not all of these odds and ends are devoid of value, though. In this article I'll share some of the more interesting oddments I've encountered recently and a few thoughts as to why they're notable.
2.73% vs. 2.88%
That's the 12-month yield of Vanguard High Dividend Yield Index compared with the same measure for Vanguard Value Index (VIVAX). That's right; Value Index's yield is higher, at least by this measure of yield, which Morningstar calculates by dividing the sum of the funds' income distributions for that past 12 months by the previous month's net asset value. There are other ways of calculating a fund's yield that gives High Dividend Yield Index a higher yield, though not by much. Vanguard's Web site, for example, shows a 30-day yield of 3.35% for High Dividend Yield and 3.02% for Value Index, which doesn't seem like a huge difference to me.
Why is this surprising? When High Dividend Yield launched about a year and a half ago, I expected it to offer a more generous yield than you could get from a conventional value equity fund like Value Index. So far, though, the biggest difference between High Dividend Yield and Value Index has been their sector weights. Value Index has more in software and hardware stocks and less in consumer goods and industrial materials. That helps explain why High Dividend Yield has lost less than Value Index in the last year, since industrial and consumer goods stocks have been among the better-performing sectors. That also may help explain the similar yields. Value Index's holdings have fallen farther, increasing the portfolio's yield. If I had to choose between the two now, I'd pick Value Index because you get about the same yield for half the expense ratio (0.20% versus 0.40%).
3.65% vs. 2.69%
That's the yield of Vanguard Intermediate-Term Tax-Exempt (VWITX) versus that of Vanguard Intermediate-Term Treasury (VFITX), according to Vanguard's Web site. That's also an opportunity. Usually municipal bond funds offer lower absolute yields than those of taxable bond funds of similar durations and quality. A variety of factors--worries about the weak economy's effect on local governments, the precarious conditions of firms that insure muni bonds, a general flight to the safety of government bonds, and supply and demand for new muni-bond issues--have given Intermediate-Term Tax-Exempt a yield advantage. That edge gets even bigger once you adjust for taxes. For those in the 28% federal tax bracket, Intermediate-Term Tax-Exempt's tax-equivalent yield is about 5%. Because yield is an indication of future return potential, Intermediate Tax-Exempt clearly offers the better opportunity.
22.5% vs. -15.2%
Holy reversal of fortune Batman! That's what Vanguard Growth Equity gained in all of 2007 versus what it lost in the first quarter of 2008. The story is simple. The fund's aggressive helping of tech helped last year and hurt in early 2008 as high-priced stocks such as Google (GOOG) and Apple (AAPL) sold off. This is why I've always called this a feast or famine fund.
2.38% vs. -4.62%
These numbers show the problem with feast-or-famine funds. They're Vanguard Growth Equity's total returns for the trailing 10-year period through the end of March 31, 2008, versus its Morningstar Investor Returns for the same period. Investor returns take into account cash flows in and out of a fund. If they are significantly below the offering's total returns it means investors have been essentially buying high and selling low. Much of the disparity between Growth Equity's total and investor returns can be explained by the 2000-02 bear market, which hit right after the offering joined the Vanguard stable (it used to be a separate fund offered by Turner Investment Partners) and gathered a lot of assets. Vanguard Growth Equity is very good at what it does. Manager Bob Turner buys firms with rapidly accelerating earnings growth and quickly sells those that disappoint. He sticks with this formula no matter what, which leads to roller-coaster-like performance. His discipline, however, has paid off over the long term. That's why the fund is an Analyst Pick. Only those who expect and can handle the fund's ups and downs reap its benefits, though, and it seems like few have been able to cope.
-43%
Here's an upside to Vanguard Growth Equity's downside: Its potential capital gains exposure is deeply negative. Its -43% PCGE is the lowest among all Vanguard funds. Potential capital gain exposure measures how much a fund's assets have appreciated, and it can be an indicator of possible future capital gain distributions. A negative PCGE means that the fund has reported losses on its books. The fund may be able to use those losses to offset future gains, thereby reducing the possibility of a capital gain distribution. In Growth Equity's case, the fund hasn't made a taxable capital gain distribution in eight years because of losses sustained in down periods and it's unlikely to pay a gain for a long time.
Vanguard Fund Family Report | ||||
Our new eight-page report gives you independent Morningstar opinion and information on these fund families each month. | It includes news, in-depth analysis on what it means for you, the best and worst funds in a family, and much more. Learn more. | |||
$99.00 for 12 issues | ||||
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.