Vanguard Russell 2000 Value Index Fund Institutional Shares VRTVX

Vanguard Russell 2000 Value Index I holds a quantitatively derived Bronze Morningstar Medalist Rating. The rating reflects that it has scored better than the norm on factors Morningstar research associates with future outperformance relative to category peers.

People: Above Average

Note: This share class' People Pillar rating and analysis are inherited from an analyst-covered share class under the same Strategy Provider Company (rolled up to Branding Name) and Morningstar Category Broad Group: Vanguard FTSE All-Wld ex-US SmCp ETF (SecID: FOUSA08NFZ).

Process: Average

Note: This share class' Process Pillar rating and analysis are inherited from an analyst-covered passive share class, which tracks the same index: iShares Russell 2000 Value ETF (SecID: FEUSA00019).

Performance (in US Dollar)

Over the past 12 months, Vanguard Russell 2000 Value Index I share class returned 46.4%, outperforming both its category index, the Russell 2000 Value TR USD Index (46.3%), and its Morningstar category peers (36%). Over 10 years, the fund returned 10.4% per year, mirroring the index (10.4% per year) while outperforming its Morningstar Category average (9.7% per year).

Price

Vanguard Russell 2000 Value Index I's Prospectus Adjusted Expense Ratio is 0.05% per year. It places it in the cheapest quintile of the Morningstar US Fund Small Value Category, where the median fee is 1.02% per year. This cost positioning translates into a Medalist Rating Price Score of 2.46, 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.

The Russell 2000 Value Index captures the cheaper half of the Russell 2000 Index. It assigns a composite style score to all stocks in the Russell 2000 based on their price/book ratio, two-year analyst consensus-growth forecast, and five-year sales per share growth. The price/book ratio receives a 50% weight in the calculation, and the two growth measures each receive 25%. FTSE Russell then buckets the cheaper half into the value index, with growth-oriented firms fully allocated to the Russell 2000 Growth Index. Stocks landing near the midpoint are partially allocated to both. Russell added a second rebalancing date to the index that should spread trading activity across the year. Going forward, it will add or remove holdings in June and November that have gotten too large or too small to qualify for the Russell 2000 parent index.

Market-cap weighting is an efficient way to allocate the portfolio because it harnesses the market's consensus opinion of each stock’s relative value. Stocks that grow in size take up a larger share of the portfolio, while smaller companies that may be struggling will take on a less important role. This also helps rein in turnover, which typically runs less than 30% per year, lower than its average peer. Relatively lean turnover is compelling, but the index’s lack of buffers at the lower market-cap threshold promotes greater churn among illiquid micro-cap stocks, running up trading costs that hurt performance.

The portfolio looks similar to the category average. Sector compositions usually mimic the average peer, and valuations tend to follow. Approximating the category average means the fund’s low fee should aid its category-relative performance.

The fund’s average market cap is about half that of the category average. Smaller stocks tend to be more volatile than their larger peers, but they may have more room to run. The micro-cap stocks that constitute a considerable chunk of the portfolio also tend to be of a lower quality than their slightly larger counterparts. The Russell 2000 Index does not incorporate any screens to limit low-quality names from entering the portfolio. Common quality metrics, like average return on assets and average return on invested capital, usually fall short of the average peer. This adds risk that may not be rewarded in an already volatile market segment.

Stocks in this portfolio have modest valuations that reflect the market’s dim view of their outlooks. Many are stable businesses whose asset-heavy balance sheets deflate their price/book ratios. Financial-services companies fit this mold and claim around a fourth of the portfolio, considerably more than any other sector. While many of these stocks should prove worthy of their modest valuations, they represent a lower hurdle to clear on the path to solid returns.

Note: This share class' Process Pillar rating and analysis are inherited from an analyst-covered passive share class which tracks the same index: iShares Russell 2000 Value ETF (SecID: FEUSA00019).

Vanguard's equity index group earns an Above Average People Pillar rating for its well-supported and stable management team that's adept at leveraging Vanguard's comprehensive resources. Its portfolio managers benefit from the firm's global infrastructure and advanced portfolio management technology, which facilitates cost-efficient trading around the globe. The infrequent turnover of managers, coupled with Vanguard's practice of rotating them across various funds, enhances their expertise and understanding of different market segments.

The fund's managers directly handle trading, providing them with deeper insights into the portfolio's operations than a stand-alone trader might have. They are backed by a global team of dedicated personnel and employ sophisticated, scalable technology to minimize their workload and enhance tracking accuracy. Vanguard's independent risk management team plays a crucial role in ensuring its funds adhere to predetermined tracking tolerances. It collaborates closely with the managers to oversee trades and address potential issues proactively. Vanguard compensates managers based on tracking error and excess return metrics to foster a culture of accountability and ensure that the management team's interests are closely tied to investors'.

Note: This share class' People Pillar rating and analysis are inherited from an analyst-covered share class under the same Strategy Provider Company (rolled up to Branding Name) and Morningstar Category Broad Group: Vanguard FTSE All-Wld ex-US SmCp ETF (SecID: FOUSA08NFZ).

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.

Note: This share class' Parent Pillar rating is analyst-driven, as its Branding Name, Vanguard (Branding Name ID: BN00000AAL), is covered by Morningstar Manager Research.

Performance is evaluated in US Dollar, measured to the end of April 2026.

Short-Term Performance

Over the past 12 months, Vanguard Russell 2000 Value Index I share class returned 46.4%, outperforming its category index, the Russell 2000 Value TR USD Index (46.3%), and its Morningstar category peers (36%). Over the three-year period, it returned 18.4% per year, mirroring the index (18.3% per year) while outperforming its Morningstar category peers (15.4% per year).

Long-Term Performance

The fund's five-year annualized return of 7.3% mirrored the benchmark (7.3% per year) but fell short of the Morningstar Category average (7.6% per year). Across 10 years, the fund returned 10.4% per year, mirroring the index (10.4% per year) but ahead of its Morningstar Category average (9.7% per year).

Vanguard Russell 2000 Value Index I's Prospectus Adjusted Expense Ratio is 0.05% per year. It places it in the cheapest quintile of the Morningstar US Fund Small Value Category, where the median fee is 1.02% per year. This cost positioning translates into a Medalist Rating Price Score of 2.46, 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.