Pay Attention to the Men behind the Curtain at Vanguard
Family lifts the veil on its Managed Payout Funds' investment committee.
Vanguard has revealed the men behind the curtain of its Managed Payout Funds.
Since it launched its three endowmentlike funds in 2008, the fund family has kept to itself the names of the members of the investment committee that sets and tweaks the asset allocations for the portfolios. That opacity is one of the reasons why it has been hard to recommend these offerings, which are designed to use sophisticated, institutional-grade portfolio-management strategies to make investors' nest eggs last forever, while supporting monthly payments of 3% to 7% of the funds' three-year trailing average net asset values. Think David Swensen's Yale Model for the masses.
The other reasons have included the uninspiring showing of the funds, which are Vanguard's first attempt at endowment-style investing for retail investors. Vanguard Managed Payout Growth Focus (VPGFX), Vanguard Managed Payout Growth & Distribution (VPGDX), and Vanguard Managed Payout Distribution Focus (VPDFX) have lost between 5% and 8% annualized from their May 2008 inception through early March 2010, more than most other payout funds that have been launched in recent years, such as Fidelity's Income Replacement funds and Schwab's Monthly Income funds. From June 2008 to June 2009, Vanguard's Managed Payout Funds also shed more than the typical college and university endowment, which dropped 18.7%, according to a survey of 842 institutions by the National Association of College and University Business Officers and educational institution investment firm Commonfund. The funds fell between 21% and 27% in that time.
Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.