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What New Management Means for Vanguard Wellington

The fund recently underwent a change in leadership. Here's what we think of the changes so far.

An experienced team employing a quality-focused and risk-aware process, combined with low fees, underlie Vanguard Wellington’s VWENX VWELX Morningstar Analyst Rating of Gold.

Venerable Vanguard Wellington recently underwent a generational transfer of leadership. On the equity side, Daniel Pozen took over as the lead manager in July 2020 after working closely with his predecessor, Edward Bousa, since 2015 and undergoing careful vetting by both Vanguard and Wellington, the subadvisor for this fund. On the bond side, John Keogh retired in 2019 and Michael Stack retired in 2021, leaving Loren Moran in charge. She has worked closely with both since 2014. Minimal disruption is anticipated since Pozen and Moran are supported by Wellington’s well-regarded global industry analysts, credit analysts, and macro analysts. The current managers’ investment philosophies align with those of their predecessors, to boot.

Pozen, like Bousa, targets high-quality, dividend-paying large caps with a durable edge while remaining disciplined about valuation. However, he is willing to pay more for firms he believes have long-term growth opportunities to drive incremental returns on invested capital. Recent purchases include Charles Schwab SCHW, Mastercard MA, and Visa V; all earn Morningstar Economic Moat Ratings of wide. He began purchasing the latter two in the fourth quarter of 2021, as he felt the market was too pessimistic about the firms’ competitive position. Moran runs a bond sleeve tilted toward A and BBB rated credits to supplement the fund’s yield without adding much risk to the portfolio.

Pozen faced a challenging market when he executed his planned portfolio adjustments in early 2020. He trimmed firms that have success drivers outside of management’s control, such as oil prices and interest rates. He sold energy and insurance names, which happened to be among the hardest hit during the first quarter of 2020. But this allowed him to bolster his high-conviction, wide-moat names at what he deems attractive valuations. While the fund underperformed its prospectus benchmark (65% U.S. equities and 35% bonds) in 2020, it rebounded nicely in 2021. Investors here remain in good hands for the long term.

Key Proprietary Morningstar Metrics

Morningstar Analyst Rating: Gold Process Pillar: High People Pillar: Above Average Parent Pillar: High

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