Morningstar

Vanguard Glb Small-Cp Idx £ Dist

Analyst Report
Morningstar's Take
|30/09/2024
by Morningstar Manager Research
Vanguard announces further transitions in its investment leadership team. The firm recently announced the following changes to its portfolio management and investment strategy group:

Fixed-Income Group:

Vanguard has appointed Jean Bauler as the new head of its Asia Pacific Fixed-Income Group. The APAC FIG team is responsible for Australian portfolio of fixed-income index funds and exchange-traded funds. Bauler, an industry veteran, recently joined Vanguard after 11 years stint as the Director - Markets Treasury in HSBC Australia. Geoff Parrish, the former head of APAC FIG, has taken up a broader role within the Vanguard group as the global head of bond index based out of the United States. The change will come into effect from October 2021.

Equity Index Group:

Effective mid-December 2021, Vanguard will move away from the current structure of one person as the head of investments as well as the Investment Strategy Group, bifurcating the two critical functions among Vanguard veterans Duncan Burns and Alexis Gray. Burns and Gray will succeed Daniel Reyes as the head of investment- APAC and head of ISG, respectively. Under the new structure, Burns will retain his current role of head of EIG, where he oversees the management of Vanguard’s Australian and global equity index portfolios and the firm’s trading operation in the Asia-Pacific region, while Gray has been promoted from within ISG. Reyes will move to the US, taking up the charge as the global head of investment products. Reyes took over the helm of investments and ISG following Rodney Comegy’s relocation to Vanguard headquarters toward the latter half of the 2017. In effect, this is the second leadership change in the trailing four years within this group.

Multi-Asset Group:

As at October 2021, Vanguard announced that Aidan Geysen, senior investment strategist, will move into a new role under Vanguard’s superannuation division. Geysen will continue to oversee Vanguard’s diversified strategy suite until a suitable replacement is found, with recruitment already underway. Vanguard anticipates making an announcement in the coming months.

The above changes are in accordance with Vanguard’s long-standing philosophy of senior leadership portability across various markets, asset classes, and portfolios to foster depth and breadth of leadership experience and expertise within the firm’s senior leadership teams. Vanguard’s collegial approach, coupled with its policy to globally cross-train staff, means that key-person risk is minimal. While these changes are significant, Vanguard has implemented such transitions previously without hampering its operations, and suitable institutional knowledge remains intact. As such, our conviction on the People Pillar remains intact.

 

A decline in its Process Pillar rating is the primary driver of Vanguard Glb Small-Cp Idx £ Dist's downgrade to a Morningstar Medalist Rating of Bronze from Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.



The strategy’s management team earns an Above Average People Pillar rating. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial underweight position in quality exposure and has an overweight in yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The strategy's parent organization earns the firm a High Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

 
Morningstar Medalist Rating™
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Morningstar Pillars
PeopleAbove Average
ParentHigh
ProcessAverage
 
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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