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Rekenthaler Report

Why Vanguard Killed a Good Fund

The times they are a-changin’.


Performance Winner
Yesterday, Vanguard announced that it was shutting down  Vanguard Convertible Securities  (VCVSX). Fund companies routinely liquidate their offerings. What made this termination unusual, though, is that Vanguard Convertible Securities’ performance has been solid, by any measure.

Compared with others in the convertible-bond Morningstar Category, the fund’s 15-year total returns have been average and its volatility modest. Its expense ratio, of course, is the category’s lowest. Overall, that’s an attractive combination. Morningstar’s analysts had assigned Vanguard Convertible Securities a Morningstar Analyst Rating of Bronze--indicating that the team has a “sufficient level of conviction that [the fund] will outperform its benchmark or peers … over a full market cycle.” (Not if it’s dead, it won’t.)

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