Vanguard International Growth Fund Investor Shares VWIGX

Vanguard International Growth remains among the better options in its category, thanks to a pair of skilled subadvisors.

This fund’s manager lineup has been steady for about a decade, and that’s partly because it’s delivered. Indeed, the admiral share class landed in the top decile of peers over the trailing 10-year period ending May 2025, and though it fell in the second quartile over the trailing five-year period, it still outpaced the MSCI ACWI ex USA Growth category benchmark.

Scotland-based Baillie Gifford oversees roughly two-thirds of fund assets and is accordingly most responsible for the strong run of performance. The team’s high-growth approach produced tremendous returns during the last bull market and has reemerged after a painful stretch in 2021 and 2022 that damaged this fund’s record. Never ones to react impulsively, the Baillie Gifford team took time to assess their investment framework, and they recently confirmed that they will pay greater heed to interim volatility and have a tighter grip on risk than in the past. This could mean narrower performance swings for investors, but managers Tom Coutts and Lawrence Burns are merely modifying their aggressive growth approach rather than abandoning it. It also helps that their firm’s newly installed managing partners will help shepherd the 100-plus-year-old firm into its next chapter, which should be a good one given the firm’s reach, talent retention, and culture.

London-based Schroders runs the remaining third of assets and is a great complement to Baillie Gifford. Managers Simon Webber and James Gautrey pilot a more omnivorous growth approach, willing to own stocks with various business trajectories. They apply a consistent risk framework and a more skeptical eye toward high-flying stocks trading at lofty valuations. The two benefit from a global platform of analysts, but particularly a group of about 10 sector specialists who work on research in tandem and help generate ideas. That group has seen a member or two leave for a few years in a row, which is of concern, though the managers still have adequate resources.

Overall, investors can expect a well-diversified overall portfolio of over 100 stocks that still has enough punch to stand out from the crowd and its benchmark. It’s been a good recipe for some time, and that’s likely to remain the case.

Both subadvisors follow strong approaches that suit their respective investment styles, resulting in an Above Average Process Pillar rating.

Baillie Gifford’s objective is to own growth stocks with the greatest upside potential. It looks out as far as 10 years and focuses its research on identifying emerging secular trends and the companies best positioned to capitalize on them. Themes include the growth of consumerism in Asia, health innovation, digital consumption, and artificial intelligence. This aggressive, forward-thinking approach carries unique risks that have produced spectacular successes and failures, though the managers have recently pledged to dial back the boldness of their approach to mitigate the volatility it brings. The firm's use of external research networks, presence in private markets, patience, and philosophical continuity are additional differentiating process traits.

Schroders focuses on identifying well-entrenched companies with underappreciated growth prospects while making room for short-term opportunistic plays, which tend to be in cyclical businesses on an upswing or companies primed for a turnaround. The bulk of the portfolio is invested in long-term core holdings. Positions are sized using a comprehensive fundamental risk score based on leverage, quality, and sustainability. The managers work closely with a team of top sector analysts to synthesize their investment universe and build the portfolio. Execution has been strong during the managers' tenure, featuring winners in new-age technology stocks as well as steadier areas such as consumer staples and healthcare.

This portfolio's characteristics mostly reflect Baillie Gifford's aggressive style, given that the firm oversees the majority of the fund’s assets. The fund’s average price multiples are typically well above those of the MSCI ACWI ex USA Index prospectus benchmark and a touch higher than the MSCI ACWI ex USA Growth Index category benchmark. Aggregate measures of trailing earnings and revenue growth also tend to run higher. Altogether, the portfolio tends to land to the right of the category benchmark in the Morningstar Style Box.

The portfolio typically holds around 100-120 stocks, with 30% to 40% in the top 10 holdings. Most assets are kept in large- and mega-cap stocks. As of March 2025, about 75% of the portfolio was classified in either of those buckets. The fund’s size, at over USD 40 billion as of May 2025, makes it harder to build large stakes in mid-cap companies, though the managers didn’t invest much in the space even when assets were smaller. The strategy makes room for some US-based companies such as Microsoft and Nvidia, though they can’t take up more than 15% of total fund assets.

Recent purchases highlight an ongoing evolution at Baillie Gifford as the managers widen their sights on the margin to consider strong businesses with good, though perhaps not exceptional, growth potential. Examples include software giant Microsoft, Dutch logistics company DSV AS, and French luxury goods maker Hermes—all added in 2024.

Two well-resourced firms with proven portfolio managers earn the fund an Above Average People Pillar rating.

Named managers Tom Coutts and Lawrence Burns head Baillie Gifford’s sleeve, which has a target weighting of 65% of assets. They aren't alone in their decision-making duties, as there are three others who serve on the team's portfolio construction group, including 2024 addition Robert Wilson. Longtime lead manager James Anderson retired in 2022, though the transition of his responsibilities began in 2019 when Coutts assumed his role as chair of the portfolio construction group and Burns became deputy chair. A handful of dedicated analysts provide support. The team does its own work, but Baillie Gifford's other growth-minded research teams also surface ideas. The firm’s culture of thought diversity, exploration, and creativity is its hallmark.

Simon Webber, who joined subadvisor Schroders in 1999 and has served here since 2009, took charge of the firm’s sleeve in 2013. James Gautrey, a 20-year veteran of the firm, had managed alongside Webber on a closely related strategy since 2014 and was officially named a comanager here in December 2020. The managers receive considerable support from a team of sector specialists responsible for gathering the firm’s best ideas from global analyst teams stationed in various countries. That group has regularly seen a member or two leave over the past few years, though it remains adequately staffed despite the relatively high rate of churn.

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.

This fund boasts a compelling long-term record. Since the current managers’ joint tenure began at the start of 2010, the admiral shares' 8.6% annualized gain through May 2025 easily exceeded the MSCI ACWI ex USA Growth Index's 5.9% and the average foreign large-growth Morningstar Category peer's 6.2%.

While the long-term track record is quite strong, the fund has had periods of weakness. It tumbled in 2021 but especially in 2022 when it finished near the bottom decile of the category with a 31% loss. Baillie Gifford's sleeve drove tremendous returns during the previous bull market but was also most responsible for the poor 2022. But such a volatile return profile should be expected here, given that Baillie Gifford has the larger share of assets. Still, Schroders' sleeve has offered some ballast and has held its own in both down and up markets.

The fund has long made the most of its small slice of US-domiciled holdings. Stocks such as Amazon.com and Tesla were huge contributors during the past decade. But from the start of 2023, portfolio holding Nvidia has taken the crown as it ascended to become one of the most valuable companies in the world.

Over the trailing 12-month period ending May 2025, the fund’s consumer cyclical and communications stocks drove its modest outperformance. Overweighting such stocks as MercadoLibre and Sea, as well as avoiding luxury conglomerate LVMH, were among the most beneficial decisions. Conversely, industrials holdings Vestas Wind Systems and Atlas Copco were notable laggards, though they didn’t spoil the overall return.

Vanguard International Growth Inv's Prospectus Adjusted Expense Ratio is 0.38% per year. It places it in the cheapest quintile of the Morningstar US Fund Foreign Large Growth Category, where the median fee is 0.9% per year. This cost positioning translates into a Medalist Rating Price Score of 2.37, 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.