Vanguard Windsor II Fund Admiral Shares VWNAX

Vanguard Windsor II continues to have long-term merit following a subadvisor change. The strategy retains its Above Average People rating and its Average Process rating.

On Dec. 15, 2025, Vanguard announced that Harris Oakmark would replace Lazard Asset Management as a subadvisor, effective immediately. Lazard, which had served as a subadvisor since 2007 and once managed nearly 40% of assets, had seen its allocation reduced in the past couple of years as Vanguard shifted to equal weightings among the four subadvisors, which include Sanders Capital, Hotchkis & Wiley, and Aristotle Capital.

The changes are, in part, driven by Vanguard’s effort to realign the strategy with its large-value roots. Past shifts, such as removing deep-value manager Barrow Hanley in 2019 and increased allocations to blend-tilting subadvisors like Lazard and Aristotle, had shifted the portfolio into the blend section of the Morningstar Style Box. Replacing Lazard outright with Harris Oakmark—whose approach is more traditionally value-oriented—marks a decisive step back toward the fund’s intended style.

Bill Nygren, Robert Bierig, and Michael Nicolas—the team behind the highly rated Oakmark—have joined as managers. Nygren is a legendary value investor, but succession is a focal point considering he’s entering his late 60s. Encouragingly, it’s a team effort, with Bierig and Nicolas each being with Harris Oakmark for 20-plus years, including as comanagers on the underlying strategy since 2020 and 2022, respectively. They actively share ideas and engage in healthy debates with Nygren, and the broader 15-person investment team is strong and stable. All of that inspires confidence in the team’s future prospects even when Nygren steps away.

The current subadvisor lineup continues to offer a mix of value approaches: Aristotle for quality value; Hotchkis & Wiley for deep value; Sanders for behavioral value; and now, Harris Oakmark for flexible but traditional value. However, the resulting portfolio will remain sprawling, with 175-195 stocks, and relatively diffuse, with active share expected to remain among the lowest in the large-value Morningstar Category. Moreover, it’s unclear whether the strengths of the underlying subadvisors are preserved or diluted in the aggregate portfolio.

As a result of the subadvisor change, Vanguard expects the fund’s expense ratio to increase by 0.02% across both share classes. Still, it’s one of the cheapest actively managed large-value options, giving it a leg up on the competition from the start.

This strategy’s investment approach has some strengths but comes with some limitations, warranting an Average Process rating.

Vanguard’s multimanager setup combines four subadvisors to craft this portfolio. Vanguard's oversight and manager selection teams aim to pick subadvisors with complementary investment approaches that help provide a smoother ride for investors.

Vanguard has long intended this to be a large-value strategy, but implementation has periodically deviated from that objective. In 2019, it fired deep-value manager Barrow Hanley and shifted more assets to Lazard and Aristotle, two less-distinctive, blend-tilting subadvisors. That pushed the overall portfolio toward the blend section of the Morningstar Style Box. In 2024, it recommitted to its value roots by reducing Lazard’s allocation and moving toward equal weightings across the four subadvisors. This was further reinforced in December 2025 with the replacement of Lazard by Harris Oakmark, whose approach is flexible yet more traditionally value-oriented.

The current subadvisor lineup continues to complement each other in some ways. Aristotle provides quality-value exposure; Hotchkis & Wiley offers deep value; and Sanders follows a behavioral value approach. However, the portfolio remains sprawling, with 175-195 holdings, and relatively diffuse, with active share expected to remain among the lowest in the large-value category. Moreover, it’s unclear whether the strengths of the underlying subadvisors are preserved or diluted in the aggregate portfolio.

The December 2025 replacement of Lazard with Harris Oakmark is expected to realign Vanguard Windsor II’s sector composition. As of September 2025 (the most recently available portfolio), Windsor II’s technology allocation stood at 25%, well above the Russell 1000 Value Index’s 12%, largely due to the Lazard sleeve’s nearly 30% weighting. In contrast, Oakmark—which mimics the sleeve now run here—held just 5% in tech. Oakmark’s heavier allocations to financials (33% versus Lazard’s 18%) and energy (12% versus 3%) suggest these sectors will become more prominent in Windsor II going forward. By comparison, Windsor II’s 17% and 5% exposures to financials and energy were underweight the index’s 22% and 6%, respectively.

The expected sector changes should also help Windsor II’s style exposures align more closely with the value index. According to Morningstar’s risk model, Windsor II’s growth tilt remained slightly above the index’s as of September 2025, in part a legacy of Lazard’s blend approach. Meanwhile, Oakmark’s was much more value-oriented.

Portfolio concentration in the largest holdings is also likely to moderate. Both Lazard and Harris Oakmark sleeves held around 55 stocks, but Lazard’s was more top-heavy, with 42% of assets in its top 10 holdings, including significant positions in Microsoft and Apple. Oakmark’s top 10 accounted for a more modest 28%, with individual positions like Alphabet, Citigroup, and Charles Schwab not exceeding 4%.

Following a recent subadvisor shakeup, the strategy’s overall investment talent remains a cut above, meriting an Above Average People rating.

On Dec. 15, 2025, Vanguard announced that Harris Oakmark replaced Lazard Asset Management as a subadvisor, effective immediately. Lazard had served as a subadvisor since 2007, and at one point, it managed nearly 40% of the strategy’s assets, though Vanguard had more recently shifted to equal weightings among the four subadvisors. Lazard’s Andrew Lacey and Ross Seiden are no longer managers here.

Bill Nygren, Robert Bierig, and Michael Nicolas—the team behind the highly rated Oakmark—have joined as managers. Nygren is a legendary value investor, but succession is a focal point considering he's entering his late 60s. Encouragingly, it's a team effort here, with Bierig and Nicolas each being with the firm for 20-plus years while actively sharing ideas and engaging in healthy debates with Nygren. They are also part of a strong and stable 15-member investment team. All of this inspires confidence that the sleeve will remain in good hands whenever Nygren decides to step away.

The other three subadvisors remain in place. That includes George Davis and Scott McBride of Hotchkis & Wiley, a subadvisor since 2003. Lew Sanders and John Mahedy of Sanders Capital have been in place since 2010. Aristotle Capital was a more recent addition to the roster, joining in 2019 and led by Howard Gleicher and Greg Padilla. Each subadvisor taps sizable and experienced analyst teams for support.

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.

While acknowledging Vanguard’s willingness to evolve the subadvisor lineup and style profile, long-term investors here have generally been rewarded. In the trailing 15 years through November 2025, the fund’s Admiral share class gained 12.6% annualized, beating the Russell 1000 Value Index’s 11.3% gain and about 90.0% of its large-value category peers. Volatility—per its standard deviation of returns—has been in line with its benchmarks, so risk-adjusted results tell a similar story. Its Sharpe ratio of 0.79 during the same period beat the index’s 0.71 and 85% of its peers.

For several years, the strategy had done better when growth outperformed value, and worse when value beat growth (relative to value peers). But Lazard's more core-oriented approach is out of the picture, replaced by Harris Oakmark’s more traditional value philosophy. As such, investors shouldn’t expect the same performance pattern to persist, and stock-selection capabilities of the underlying subadvisors should be a bigger driver of relative returns going forward.

Lazard’s sleeve did contribute to the results of late as the market rewarded growth. That helps explain why the fund’s 12.3% return in the year ending November 2025 easily beat the index’s 7.3% and about 90.0% of peers. Overweightings in—and good picks within—technology and communication services buoyed returns, with individual drivers, including Seagate Technology, Taiwan Semiconductor Manufacturing, and Alphabet.

Vanguard Windsor II Admiral's Prospectus Adjusted Expense Ratio is 0.24% 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 2.19, 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.