4 Vanguard Funds Pummeled by Outflows

Russell Kinnel: The full fund flow data for 2024 just came out, and a few Vanguard funds actually had major outflows. Does the fact that some investors are leaving mean you should? Absolutely not. In fact, the four funds I’ll highlight today are all rated Gold by our analysts, so you should think about going the other way from the crowd. Let’s take a look.

4 Vanguard Funds Pummeled by Outflows

1. Vanguard Wellington VWELX
2. Vanguard Wellesley Income VWINX
3. Vanguard Dividend Growth VDIGX
4. Vanguard Primecap VPMAX

Vanguard Wellington and its sibling Vanguard Wellesley Income shed more than $10 billion and $6 billion, respectively, in net flows for 2024. The first thing to check when you see big outflow figures is performance, and in this case the funds are actually performing fine. Wellington’s returns are in the top quartile over all the trailing periods, and Wellesley is middling for three and five years but top-quartile for 10 and 15, so nothing that should drive flows. I think the driver of flows in this case is the long-running move to target-date funds in 401(k)s. Balanced funds like Wellington and Wellesley Income used to be at the heart of 401(k)s, but they’ve been replaced by target-date funds, which really are a better fit for investors. But they’re still great funds with a conservative mix of stocks and bonds that makes them a welcome place to go in volatile markets.

Vanguard Dividend Growth is a performance story. The fund has lagged its peers of late and endured more than $6 billion in outflows. Dividend growers tend to be high-quality, stable businesses, which makes them excellent performers in recessions but laggards in fast-growing years. The fund has less in tech than most large-blend funds and much less to Nvidia and other high-flying tech names that have led the market recently. But still, the fund is doing just what it is supposed to, and it should do better over the coming decade

Vanguard Primecap has great long-term performance, but its three- and five-year returns are lagging. The fund tends to prefer healthcare to tech, and that’s why it’s had more pedestrian performance lately. But we love the team and their deep fundamental-driven process, so we rate it Gold. I don’t own this fund, but I own other funds managed by Primecap.

Watch Active ETFs vs. Mutual Funds: What to Know Before Picking a New Fund for more from Russel Kinnel.