Vanguard Explorer Adds Arrowpoint as Eighth Subadvisor

Neutral-rated  Vanguard Explorer (VEXPX) added Arrowpoint Partners, LLC as the fund's eighth subadvisor, effective June 16, 2014. According to Vanguard, Arrowpoint will manage 4% of assets. Funding most of Arrowpoint's allocation are decreases to subadvisors Century's and Chartwell's allocations, each of which now have a 7% portion from 9% at the end of March 2014.

Vanguard typically does not discuss reasons for making changes to specific subadvisor allocations. Historically, the firm has added subadvisors in response to capacity constraints, large cash balances, undesirable portfolio characteristics such as excessive volatility for a given mandate (not likely an issue here), or when Vanguard's manager-search efforts have uncovered a promising new manager.

Chad Meade and Brian Schaub will manage Arrowpoint's portion of the fund. The duo joined Arrowpoint in June 2013 and took the helm of mid-growth fund  Meridian Growth (MERDX) in September 2013, as well as  Meridian Small Cap Growth (MISGX) at its December 2013 inception. They previously amassed excellent track records in a nearly seven-year stint at small-growth fund  Janus Triton (JATTX) and a three-year tenure at  Janus Venture (JAVTX). At Arrowpoint, they're supported by a six-person analyst team that includes several former Janus coworkers.

Meanwhile, subadvisors Wellington, Kalmar, and Granahan remain the fund's largest contributors, together steering nearly three fourths of the portfolio, as they did before these latest changes. It's thus unlikely that the portfolio’s character or the fund's performance patterns will change much. With a large number of subadvisors and more than $12 billion in assets, the diffuse portfolio spans more than 600 names and has had a hard time standing out from its Russell 2500 Growth benchmark over the past 10 years. Compared with the small-growth category, that result is middling.

Senior fund analyst Greg Carlson contributed to this report.