Vanguard U.S. Growth Fund Investor Shares VWUSX

Despite two impending manager retirements, Vanguard U.S. Growth’s three deep and talented subadvisors are still a draw.

This strategy has seen its fair share of changes over the years, but it still has a good foundation. Vanguard has removed three subadvisors from the strategy since late 2018. Most recently, they removed subadvisor Vanguard Quantitative Equity Group, or QEG, in May 2023, after serving on the strategy for just four years. The strategy now splits its assets across three skilled subadvisors, with 50% going to Wellington Management, 30% to Jennison Associates, and 20% to Baillie Gifford. These firms all benefit from substantial analyst resources, strong investment cultures, and boast strong performance histories.

But two of these teams will lose important leaders in the next year. Wellington veteran and this strategy’s longest-serving manager, Andrew Shilling, plans to retire in December 2025. He will be succeeded by Clark Shields, who has worked on Wellington’s large-cap growth team for several years and has been training with Shilling to be his successor for several years. The Jennison sleeve will also undergo some changes, as longtime manager Kathleen McCarragher will retire at the end of June 2026. McCarragher and Blair Boyer have been listed managers on this strategy since Jennison was added to the mix in 2014, but the firm takes more of a team-based approach to managing its sleeve. As part of McCarragher’s gradual transition, Jennison veteran Natasha Kuhlkin will join Boyer and McCarragher as the co-head of growth equity in July 2025. While these departures create some uncertainty, the succeeding managers’ experience and familiarity should ensure continuity.

Each subadvisor varies in its growth emphasis, but the overall portfolio is still quite aggressive. Baillie Gifford’s sleeve ventures furthest into aggressive-growth stocks, and it also tends to own more volatile small- and mid-cap stocks. Wellington and Jennison provide some balance but still fall well into the growth bucket. However, despite the portfolio's growth tilt, the combination of the three sleeves does not produce a very distinctive portfolio versus its Russell 1000 Growth benchmark. Removing Vanguard QEG’s sprawling portfolio helped address, but did not solve, this drawback.

Since the current subadvisor mix took shape in 2023, the strategy’s limited track record is solid. Over the trailing two years through May 2025, the admiral shares’ 25.8% annualized return was ahead of the Russell 1000 Growth Index’s 25.4% and the average large-growth peer’s 23.0%. Stocks such as Netflix and Duolingo were standouts over this stretch.

Overall, the strategy remains in good shape and should continue to deliver, despite the upcoming manager changes.

The strategy's three subadvisors take different approaches to growth investing; however, altogether, they don’t form a very distinctive growth-stock portfolio, which warrants an Average Process Pillar rating.

Vanguard's portfolio review department monitors the subadvisors and handles manager selection; the group is large and experienced, and it has proved willing to make changes. In May 2023, the group removed subadvisor Vanguard QEG, which managed roughly 20% of assets and was the only subadvisor to apply a quantitative approach.

The remaining subadvisors—Wellington Management, Jennison Associates, and Baillie Gifford—follow a bottom-up, long-term approach. Jennison's Kathleen McCarragher and Blair Boyer are willing to pay up for firms poised to grow sales faster than the S&P 500. Wellington's Andrew Shilling and Clark Shields insist on durable competitive advantages and reasonable valuations but also won't shy away from prospects with above-average growth opportunities. Baillie Gifford's Gary Robinson and Tom Slater are willing to wager big on innovative growth stocks they think will double in price in the next three to five years and operate the most aggressive sleeve of the three.

The removal of Vanguard QEG and its wide-ranging portfolio was intended to make the portfolio more distinct versus its Russell 1000 Growth Index. However, that move has only made a marginal impact across a limited sample.

By removing quantitative subadvisor Vanguard QEG in May 2023, the strategy’s previously broad 270- to 300-stock portfolio was reduced to roughly 125 stocks. The portfolio also became more concentrated. As of March 2025, the portfolio's 10 largest holdings made up 52.9% of assets, an increase from 40.2% two years ago. Still, the portfolio is less concentrated than the Russell 1000 Growth Index and its median active large-growth Morningstar Category peer, whose 10 largest holdings made up 58.2% and 53.4% of assets, respectively.

Despite these changes, the overall portfolio has not become more distinctive. The portfolio's active share (a measure of portfolio differentiation from a benchmark) has continued to hover in the high 30s to low 40s. In fact, its 38.8% active share in March 2025 ranked in the bottom quintile of all active large-growth peers.

The portfolio still has an aggressive growth profile, with large helpings of consumer cyclical, technology, and internet-related stocks. It typically has more exposure than most peers to companies that Morningstar equity analysts contend lack clear competitive advantages, such as healthcare REIT Welltower and software company Snowflake. The portfolio's helping of small- and mid-cap stocks also tends to be greater than the index's, largely because of Baillie Gifford, which likes to venture into these more volatile areas.

Despite a history of lineup changes, the three subadvisors that are in place are of strong quality, earning an Above Average People Pillar rating.

Vanguard's portfolio review department oversees this strategy and handles manager selection and asset allocation. The group has proved that it is not afraid to make changes. It has removed three subadvisors from the strategy since late 2018. In addition, it merged this strategy with Vanguard Morgan Growth in April 2019, which resulted in a reshuffling of allocations among existing subadvisors and the addition of Vanguard QEG to the mix. However, just four years later, it removed Vanguard QEG from the fund and gave its roughly 20% of assets to Wellington, which already managed 30% of assets.

Three talented stock-picking teams from Wellington Management, Jennison Associates, and Baillie Gifford remain, with a target allocation of 50%, 30%, and 20% to each, respectively. All subadvisors have experienced managers and considerable research support, but two of the teams will be losing experienced leaders in the next year. Lead manager of the Wellington sleeve and this strategy’s longest-serving manager, Andrew Shilling, will retire in December 2025. His right-hand man, Clark Shields, will take over, as part of a transition that has been in the works for several years. Additionally, the Jennison team that earns an Above Average People Pillar rating on Harbor Capital Appreciation will undergo some changes. Experienced manager Kathleen McCarragher plans to retire in mid-2026, but her longtime comanager Blair Boyer and Jennison veteran Natasha Kuhlkin will take over, along with help from a pair of other unlisted managers.

While these changes create some uncertainty, proper succession planning and lead time should ensure a smooth transition.

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 the current subadvisor lineup took shape in June 2023, this strategy’s performance has been solid. From then through May 2025, the admiral shares’ 25.8% annualized return was slightly ahead of the Russell 1000 Growth Index’s 25.4% rise and well ahead of the average large-growth category’s 23.0% gain. Over this stretch, stock-picking in consumer discretionary and consumer staples was particularly strong, but their healthcare choices, such as Moderna and NovoCure, struggled.

The strategy is coming off one of its most difficult stretches in its lifetime. In 2021 and 2022, the strategy lost 6.4% annualized, trailing its typical peer's 2.6% loss and well behind the Russell 1000 Growth Index's 0.6% gain. The strategy’s aggressive portfolio was largely to blame for the underperformance, as high-growth stocks were hit hard in 2022. Some of the strategy's more volatile growth stocks, like The Trade Desk and Shopify, which had propelled the strategy in previous years, were big detractors.

Despite this recent rough patch, long-term performance is still decent; the strategy's trailing 10- and 15-year returns through May 2025 beat its category average but slightly lagged its benchmark. However, with periodic changes in subadvisors, managers, and allocations to the underlying strategies, it is difficult to attribute this entire track record to the current managers.

Vanguard US Growth Investor's Prospectus Adjusted Expense Ratio is 0.35% per year. It places it in the cheapest quintile of the Morningstar US Fund Large Growth Category, where the median fee is 0.82% per year. This cost positioning translates into a Medalist Rating Price Score of 2.12, 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.