Vanguard Equity-Income Fund Investor Shares VEIPX

Vanguard Equity-Income’s subadvisors’ complementary approaches earn an Above Average Process rating, while the teams earn an Average People rating.

Subadvisors Vanguard Quantitative Equity Group and Wellington Management went through portfolio management changes several years ago. Portfolio Manager Sharon Hill of QEG took charge of its sleeve in October 2021 and runs one-third of the fund’s assets. Portfolio manager Matthew Hand of Wellington Management became lead in July 2022 and invests the other two-thirds.

The combination has worked well recently and over its full span: Over the 12 months ended Jan. 31, 2026, the strategy’s admiral shares gained 16.4%, just outside the top third of its large-value Morningstar Category. That topped both the Russell 1000 Value Index category benchmark and its FTSE High Dividend Yield Index prospectus benchmark. Since Hill took charge on Oct. 1, 2021, the fund gained 13.1% through Jan. 31, 2026, matching its prospectus bogy and topping the typical peer and category index by more than 1.5 percentage points.

The two sleeves complement each other via distinct approaches. With more than 20 years of experience on his firm’s strategy, Hand has maintained the long-term approach. Using traditional qualitative analysis, he assembles a portfolio of 60-70 dividend-paying stocks that he thinks have solid growth prospects. He takes modest sector differences from its benchmark and also invests abroad, typically about 10% or more of assets. The strategy will considerably overweight favored stocks versus the index. Hill joined Vanguard in August 2019 as a quantitative investing veteran after two decades at Macquarie Group. She has revamped QEG’s quantitative approach for this fund. It closely tracks the FTSE High Dividend Yield Index’s sector weightings, sticks to US stocks, and only modestly overweights top stocks.

The total package makes for an attractively cautious portfolio featuring solid downside protection and decent yield that’s not built upon risky high-dividend-payers. Its low fees are another boon.

Two subadvisors’ distinctive equity-income approaches mesh well to earn an Above Average Process rating.

Wellington runs two-thirds of this fund’s assets using a long-standing process. Its traditional view holds that a portfolio of quality companies paying attractive, growing dividends but selling at below-market prices should outperform. With his team and Wellington’s global research analysts, portfolio manager Matt Hand judges the durability of firms’ historical earnings and develops long-term normalized earnings estimates to derive their valuations. The end result is a 60- to 70-stock sleeve within the fund, often with about 10% from overseas, with moderate sector differences against the FTSE High Dividend Index prospectus benchmark.

Vanguard's QEG team manages about a third of the strategy's assets. Lead manager Sharon Hill’s team uses quant models to pick stocks from the FTSE High Dividend Yield Index. Hill fully overhauled QEG’s approach here. Until mid-2022, the model used six factors covering a range of investing styles. Hill installed a new model targeting four factors—valuation, quality, sentiment, and dividend growth—that are crucial to equity-income stocks. Risk constraints keep the sleeve’s sector and stock weightings near those of the benchmark to drive relative performance via broad-based stock selection. This sleeve typically holds about 150 domestic stocks, with nearly sector-neutral weightings.

The income mandate and FTSE High Dividend Index benchmark mean the portfolio will look different from the Russell 1000 Value Index category benchmark. For example, at year-end 2026, the Russell index had an 8% stake in communication services, making the fund’s 2% weighting look light—but that nearly matched the FTSE bogy’s weighting. On the flip side, the fund’s 10% exposure to consumer staples looked bullish against the category index’s 7% stake but was below the FTSE index’s 11%.

In some ways, the subadvisors tone down each other’s stances, as in the international equity weighting. Vanguard’s focus on domestic stocks tones down Wellington’s overseas ventures. When combined here, the fund held 7% in non-US stocks, just a bit above the large-value category average as of December 2025.

All 196 holdings in the fund at year-end 2025 paid a dividend during the year. As is true for the index, the bulk of the portfolio’s weighting is in companies paying dividends between 2% and 4%. Stocks in that range held 56% of fund assets, essentially matching the 55% for the index. The strategy shows caution toward especially high dividends that could indicate instability: Nothing in the portfolio paid a 7% or greater dividend recently, while 20 small index constituents did so. Just below that line, though, the fund overweighted insurer Progressive with its recent 6.8% yield.

Both teams feature small groups of experienced investors who haven’t been together long, earning an Average People rating.

Portfolio manager Matthew Hand took the lead of subadvisor Wellington’s sleeve in July 2022 after longtime lead manager Michael Reckmeyer retired; he co-leads the firm’s six-person large-value team. Hand joined the team in 2004 as an analyst, formally began portfolio manager training in 2018, and became a named manager here in October 2021. Adam Illfelder, Hand’s team co-leader, oversees mandates that don’t require dividends. Although most team members have long industry tenures, three have joined this team since 2017.

Portfolio manager Sharon Hill joined Vanguard and its QEG in August 2019 after nearly 20 years at Macquarie Group. She became a manager here in early 2021 and is now solo manager following the retirements of James Stetler and Binbin Guo in 2021. Hill leads a seven-person team focusing here on equity income. She spearheaded the modification of the QEG’s quant model to address dividends and helped lead a revamp of the quant research platform.

Both specific teams have broad support from their large firms. Wellington’s team sits among a handful of other value teams in Radnor, Penn., and has access to the 58 global industry analysts. Hill’s team has access to the firm’s four other quant teams, data scientists, and risk management group.

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.

Since Sharon Hill took charge on Oct. 1, 2021, through Jan. 31, 2026, the fund’s admiral shares have gained 13.1% annualized, nicely surpassing the typical large-value peer’s 11.6% return as well as the 11.4% of the Russell 1000 Value Index category benchmark. It has also matched the FTSE High Dividend Yield Index prospectus benchmark’s return.

In the short period under the new managers, the fund has shown some solid defense during drawdowns. There have been four times the large-value market has retreated at least 10% since the beginning of 2022, and the fund has held up much better than typical large-value peers and the Russell 1000 Value Index. In the most recent such drop, it fell 12.4% compared with the typical peer’s 15.0% slide and the category index’s 15.6% skid.

The fund’s recent yield and returns have both been solid. As of Jan. 31, 2026, its 12-month yield was 2.2%, nicely above the Russell 1000 Value Index’s 1.8% and also above the 2.0% level that a peer group of similarly mandated equity-income strategies had. That was part of the trailing-year’s 16.4% gain, ranking just outside the top third of large-value peers and outperforming most yield-focused funds in the category. In addition, its low fees help boost its net yield.

Altogether, it makes for an inexpensive, well-matched mix of distinct equity income strategies.

Vanguard Equity-Income Inv's Prospectus Adjusted Expense Ratio is 0.26% per year. It places it in the cheapest quintile of the Morningstar US Fund Large Value Category, where the median fee is 0.75% per year. This cost positioning translates into a Medalist Rating Price Score of 2.13, 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.