McNabb on the Hunt for Talent

Dan Culloton: You recently added a sub-advisor to a fund that we like a lot, Vanguard International Explorer. What's the hurdle? When do you decide that when you have a successful fund that it needs another manager or another manager can add or help that fund?

McNabb: Yes. So there is a little science and a little art, as you would imagine. So, we've watched that fund grow. It's attracting a pretty strong following. The manager has done a really terrific job, and we were reaching a point the manager hadn't raised his hand yet and said it's time to cut back. But we'd had discussions that if we got to certain asset levels, we'd at least have to think about closing the fund or restricting new purchases pretty dramatically.

We're always talking to people around the world in terms of new ideas and new capabilities, and we've been watching this one team in particular in this space and continue to be really, really impressed by them and the depth of the firm and the quality of the team. And it seemed when we put the two pieces together, we're still providing the investor what we said we were going to provide, and we think it's going to be the same kind of cost structure, same kind of quality, frankly we think the same kind of performance. And you never can guarantee that obviously, but we really think that the two pieces will fit together really well. And in a sense, we did it in anticipation of getting to a certain size and scale.

Culloton: And the managers we're talking there is the existing manager from Schroders and the new manager from Wellington Management?

McNabb: Yes. Simon Thomas who leads the Wellington team and terrific track record inside the firm. We have, as you know, and you guys have done a lot of good analysis on, we have a good relationship with Wellington and I'm really pleased with the way Wellington as a partner to us on a number of funds brings ideas and brings individuals as they're emerging within the firm. And this was a case where you should watch this team and just keep an eye on it. And it's been incubating for a while just from watching.

At any one time our guys are talking to 150 firms around the world and watching and discussing. We also have a process that as people become more promising, if you will, we bring them to our senior portfolio review team and sit across the table and spend a lot of time talking about people, process, portfolio construction, and so forth. And I think there have been a few firms where the incubation period has been as long as eight or nine years. There have been a couple where it's been much quicker.