Vanguard Replaces Advisor to U.S. Growth Fund
Vanguard Group fired Lincoln Capital Management on Friday as advisor to the $12-billion Vanguard U.S. Growth Fund, hiring New York-based Alliance Capital Management to take over the slumping portfolio.
Valley Forge, Pa.-based Vanguard is known for catering to patient, long-term investors, but apparently its board had seen enough of the management team that led U.S. Growth to trail its large-cap growth fund peers for several years.
“They lagged in the up market of 1999, in the down market of 2000 and again so far this year,” said Morningstar Inc. analyst Christopher Traulsen. “You can’t do that to shareholders.”
Lead managers David Fowler and J. Parker Hall had run the fund since 1987. John S. Cole is also listed as co-manager.
The fund came late to the technology-stock boom of the late-1990s and so lagged other growth funds. The managers then made a large bet on networking-related stocks and other tech issues in the first half of 2000--just as those stocks peaked.
Vanguard U.S. Growth is down 25.3% this year, versus a drop of 16.4% for the average big-cap growth fund, Morningstar said. The fund ranks in the bottom fifth of its category over three, five and 10 years.
John Blundin and Christopher Toub, institutional money managers at Alliance, will be the new lead managers.
Investors in the fund should take a wait-and-see approach, Traulsen suggested. One change could be a more concentrated investment style, as the portfolios Blundin and Toub run at Alliance typically have 45 to 55 stocks, whereas Vanguard U.S. Growth had 61 at the end of the first quarter.
It isn’t unprecedented for Vanguard to fire fund advisors. In 1998, it replaced Husic Capital Management as advisor to Vanguard Capital Opportunity, hiring Pasadena-based Primecap Management. In mid-2000, it replaced Phillips & Drew at Vanguard International Value, hiring Hansberger Global Investors.
Vanguard, the second-biggest U.S. fund company, uses outside advisors for about a third of its $570 billion in assets.
