Vanguard Global ESG Select Stock Fund Investor Shares VEIGX

The strategy has experienced a seamless transition, anticipating the retirement of one of its managers, thanks to effective succession planning. The remaining two managers continue to benefit from Wellington's outstanding resources. The sensible, long-term, bottom-up approach that has been executed successfully and with discipline remains unchanged. This warrants reinstating the Above Average ratings for People and Process.

The retirement of comanager Mark Mandel marked a significant leadership change for this strategy. Succession has been smooth with comanager Yolanda Courtines, who has been at the helm since inception in January 2019, providing continuity to the strategy. Samuel Cox was added to the team as Mandel’s successor already in January 2024. This allowed for an 18-month transition period in which Courtines and Cox could establish a collaborative relationship with Mandel gradually stepping back. The managers benefit from Wellington’s robust research capabilities, including over 50 global industry analysts averaging 20 years of experience, and a 40-person sustainable investment team. These supporting resources are among the key strengths.

The approach combines a focus on high relative returns on capital with strong stewardship, executed with consistent discipline and a long-term mindset. The managers begin with 750 highly liquid global stocks, applying quantitative screens to narrow it to 150 promising candidates. These are then researched intensively with input from Wellington’s global industry analysts and environmental, social, and governance team. The emphasis is on companies that demonstrate strong potential returns on equity and effective capital allocation. Stewardship involves selecting companies that balance people, planet, and profits, with a willingness to engage. The process uses an investment scorecard for consistency. The portfolios hold 35-45 stocks, with position sizes influenced by valuation, giving larger weightings to cheaper stocks. Formal limitations are few and fairly broad; emerging markets can't be more than 20% of the portfolio, and cash can't be more than 10%.

The concentrated portfolio has a consistent core style with sector allocations kept quite close to that of the benchmark, although it will typically hold little to no exposure to the communication services and energy sectors. The focus of the bottom-up stock selection is on large caps, while mid-caps are generally underweighted, and small and micro-caps are typically not part of the portfolio. On a regional basis, the portfolio has tilted consistently toward Europe at the expense of the US. The approach is long-term, with around 20% annual portfolio turnover and 10% name turnover.

The strategy has built a solid track record since its inception in January 2019, outperforming both the Morningstar Category average and category benchmark. It has proved more resilient in the down market of 2022 and showed good upside capture in the more buoyant market in the prior year. However, more recent performance has been less inspiring because of a lack of artificial intelligence-related exposure and weaker stock-selection results in the healthcare sector.

This sensible approach combines a focus on high relative returns on capital with good stewardship. It has been consistently and successfully executed with discipline, exemplifying a long-term mindset. The Process Pillar rating has been reinstated at Above Average. The managers start with a universe of 750 highly liquid global stocks and use quantitative screens to narrow it down to 150 promising portfolio candidates. They then research these candidates intensively with the help of Wellington's global industry analysts and ESG team. Fundamentally, they focus on a company's potential to generate impressive returns on equity and its management's ability to allocate capital. Stewardship-wise, they look for companies that balance outcomes for people, the planet, and profits and are willing to engage. Consistency and discipline in the process execution are anchored most notably in the use of an investment scorecard within the managers’ research. The managers build a portfolio of 35-45 stocks out of the most attractive candidates. Position sizes are at least partly determined by valuation, with cheaper stocks getting larger positions; the managers also aim to keep the portfolio diversified by sectors, regions, and other factors. Formal limitations are few and fairly broad; emerging markets can't be more than 20% of the portfolio, and cash can't be more than 10%.

The approach carries many aspects of a quality-focused philosophy, which easily can result in an expensive portfolio that would skew to the growth columns of the Morningstar Style Box. Even though it is not the managers’ main selection criterion, their valuation discipline results in a consistent core style of the concentrated portfolio. Bottom-up stock selection focuses on large caps, and mid-caps are underweighted versus the category average and category benchmark. Small and micro-caps are entirely avoided by the managers. The portfolio typically has little to no exposure to the communication services and energy sectors. Nevertheless, while there are no formal constraints on sector allocations, the managers aim to construct a diversified portfolio and tend to keep it close to the sector profile of the category benchmark. Bottom-up stock selection has steered the portfolio toward a consistent tilt to Europe at the expense of the US. The mandate leaves room for investment in emerging markets, but the managers haven’t found many opportunities in these regions. The approach is truly long-term, exemplified by a portfolio turnover of typically 20% annually, with around 10% name turnover.

Although the retirement of comanager Mark Mandel in June 2025 was a loss, succession planning was flawless, and comanager Yolanda Courtines ensures continuity. Wellington’s exceptional central resources remain a key strength. The People Pillar rating has been reinstated at Above Average. Since its inception in January 2019, Mandel and Courtines have managed this strategy. In January 2024, they were joined by Samuel Cox. Although Courtines lacked portfolio management experience before managing this strategy, she had extensive experience as an analyst covering Latin American and Eastern European banks. She worked for various sell-side firms before joining Wellington in 2006. Cox has worked in the financial industry since 2002, including at Putnam for five years, where he was co-director of equity research and comanaged several mutual funds. In 2019, he joined Wellington, where he was a dedicated analyst and backup manager at Wellington Durable Companies and Wellington Durable Enterprises before being added to the roster of this strategy. Cox has made a strong impression as Mandel’s replacement, and we believe that the 18-month transition period allowed him and Courtines to establish a collaborative relationship while Mandel gradually stepped back from this strategy. The managers benefit from Wellington's team of more than 50 global industry analysts with an average of 20 years of experience who have proved their worth on other funds. Regarding ESG, the managers are supported by Wellington's 40-person sustainable investment team. This team is larger and more experienced than those at similarly sized investment firms.

Vanguard maintains its High Parent Pillar rating as it continues to grow under new leadership.

CEO Salim Ramji has had a busy first year captaining Vanguard’s crew, and the ship remains pointed in the right direction. The firm made its largest round of fee cuts in early 2025, which came at an estimated cost of USD 350 million. It established a separate division dedicated to its advice and wealth management efforts, a sign that it wants to seriously compete within those lines of business. Asset growth has continued to be a huge success. Only BlackRock’s inflows rival the money Vanguard is taking in. Likewise, the number of clients it serves has more than doubled since 2015.

Despite that success, an ever-growing number of clients has presented a challenge: Vanguard can’t grow its services fast enough to keep up with demand. In some instances, it has had to curb certain services and capabilities or raise fees on others to cope, causing some loyal clients to criticize what they perceive as deteriorating services.

Vanguard has ambitions to bring its disruptive legacy to the bond market. It created roughly a dozen low-cost bond exchange-traded funds for US investors and several others abroad over the 12 months through June 2025. All have low fees in their respective categories, and the actively managed strategies align with Vanguard’s philosophy. They are relatively easy to understand and are conservatively managed.

Vanguard has another opportunity to prove that clients are still its priority. On the surface, its endeavor into the high-fee deal-making world of private assets alongside Wellington and Blackstone looks like a cultural mismatch. So far, the collaboration hasn’t produced anything that’s concerning.

From January 2019 through June 2025, the strategy, as measured by the Wellington Global Stewards USD N Acc, built a strong long-term track record. It significantly outperformed its peers in the same category and beat the Morningstar Global Target Market Exposure Index category benchmark, albeit by a smaller margin. The strategy achieved these commendable returns with volatility metrics in line with those of its peers, though slightly lower than the category benchmark, further enhancing its risk-adjusted performance profile. The strategy's lower risk profile was evident in down markets in 2022 when it proved much more resilient than the category average and the benchmark. It demonstrated strong upside capture in the previous year's buoyant markets. More recent performance has been less inspiring for reasons that are well within expectations for this strategy. For example, the underperformance in 2024 owed to a small negative effect from the portfolio’s size and style exposure, a neutral contribution from sector allocations, and negative stock-selection results, most notably on account of not holding AI-related stocks such as Nvidia and Broadcom. Over the first six months of 2025, the strategy slightly trailed the category benchmark. While it benefited from its large-cap exposure, sector allocations remained flat, and stock selection contributed negatively, primarily within the healthcare sector.

Vanguard Global ESG Select Stk Investor's Prospectus Adjusted Expense Ratio is 0.58% per year. It places it in the second-cheapest quintile of the Morningstar US Fund Global Large-Stock Blend Category, where the median fee is 0.88% per year. This cost positioning translates into a Medalist Rating Price Score of 1.34, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.