Like Asia, European equities have gotten a lot cheaper compared to historical averages. Another simi...
A Steady Fund in the Global Turmoil
09/09/2011 9:30 am EST
This fund has a 30-year veteran at its helm, which is the kind of experience you need in today's choppy markets, notes Karin Anderson of Morningstar FundInvestor.
Vanguard International Explorer’s (VINEX) smoother sailing is one of its many charms.
Matthew Dobbs of Schroder Asset Management has piloted this fund since 2000, and has 30 years of investment experience. He works with 15 regional sector analysts, and the team has more than a decade of investment experience.
In 2010, Vanguard added a second subadvisor, Simon Thomas of Wellington Management, to manage new flows. Thomas, who works with three dedicated analysts, started running a foreign small-cap institutional account at Wellington in 2006. Wellington runs just 5% of the mutual fund.
Dobbs looks for foreign stocks in the $2.5 billion to $3 billion range, and he gravitates toward firms growing at around 20% per year. He prizes firms with clean balance sheets and management teams with good capital-allocation track records.
When he finds stocks that he likes, he tends to hang on for several years. That’s kept the fund’s turnover well below the category norm.
Over the years, Dobbs has run a rather diffuse portfolio of 200 to 250 names. The addition of subadvisor Wellington created an even more diffuse portfolio, with roughly 360 names. That said, the Top 100 holdings soak up around 60% of assets.
Thomas takes a similar approach, in that he focuses on companies with improving fundamentals and some degree of financial stability. He buys bigger firms, though; his hunting ground includes firms in the $2 billion to $10 billion market-cap range.
The combined approaches keep the portfolio well diversified from a sector perspective. And the format is sensible, given the illiquid nature of foreign small-cap stocks, and their tendency to sell off quickly in market downdrafts.
With its broadly diversified look, don’t expect this fund to be a category leader on a calendar-year or even longer-term basis. But its design has served investors relatively well on the downside, and skillful stock picking over the years has resulted in a sturdy risk-reward profile.
This fund’s 0.39% annual expense ratio makes it the cheapest actively managed fund in its category. This levy looks especially appealing when compared with the 1.62% category average.
Vanguard has maintained a reputation as a strong steward of investor capital. Most notably, the firm keeps fees low and investment minimums reasonable. (This fund’s minimum is $3,000.)
While the firm closed this fund in the past to help control asset flows, it took another route in 2010 by adding a second subadvisor to manage incoming money. On the downside, the firm hasn’t disclosed whether the managers invest in equivalent foreign funds.
This offering is especially appealing given the volatility of this asset class. A skilled lead manager and rock-bottom fees also bolster the case for it.
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