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Fund Spy

Shakeup at a Subpar Emerging-Markets Fund

No halfway measures here.


For decades, certain mutual fund firms have delegated the day-to-day management of their funds' portfolios to others. For example, though Vanguard serves as the advisor of its actively managed funds, it has long relied on subadvisors to pick the securities for many of those portfolios. In fact, Vanguard and many others don’t stop with just one choice: The advisors often assign two, three, or even more subadvisors to separately manage portions of the same fund.

Those subadvisor lineups aren't carved in stone, though. A fund's advisor can make changes. At a multimanaged fund with five subadvisors targeting different areas of the stock market, for example, that might mean swapping the small-cap value specialist for a new firm focusing on the same universe. Or--in a practice that has become common at Vanguard in recent years--the advisor simply adds a new firm without subtracting any of the existing members, expanding the number of subadvisors as the fund’s asset base grows.

Gregg Wolper does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.