Perspectives : Investment | October 17, 2023

Meet the Belgian lawyer who manages almost $800 billion in international assets

Read time: 10 minutes

Note: This interview was edited for length and clarity.
Christine Franquin, principal and senior portfolio manager for the Vanguard Equity Index Group, talks about the evolution of the Vanguard international trading desk, the advantage gained from a feet-on-the-ground trading approach, and the technological advances that may revolutionize the way investment managers navigate markets. The Vanguard Equity Index Group is responsible for 17 international portfolios representing close to $800 billion in assets.1

Can you walk us through your background? How did you come to Vanguard Equity Index Group?

Franquin: It was by accident! By training, I am an attorney. I have a law degree from the University of Liège in Belgium. I practiced law at De Bandt, Van Hecke & Lagae (now Linklaters) for three years. This was right after the European Court of Justice reformed the European pension program to establish parity between men and women. My role was basically to estimate how many dollars a woman lost due to inequitable treatment. But my English was poor, and I needed to improve to further my career.

My experience at the law firm was finance-related, so I decided to improve upon both my language and acumen by pursuing a master’s in finance at Clark University in Worcester, Massachusetts. I met Vanguard while at an MBA fair on campus. There was an opening back in Belgium, and I was attracted to Vanguard’s unique investor-owned structure.2

When I accepted the role in 2000, I thought I would be at Vanguard for a few years.  My role was to develop Vanguard trading in Europe and help our shareholders save money on execution costs. It slowly evolved to a larger role, and I was asked to hire and train our European investment crew. Growing a team from the ground up was definitively an opportunity to expand outside of pure technical skills and develop management and strategic skills. I was appointed the head of Vanguard’s European investment team a few years later, and then I relocated to the Malvern, Pennsylvania, campus in 2011. I’m still here at Vanguard, 23 years later. It wasn’t my intent to work in financial services at the start of my career, but being at Vanguard changed my trajectory. Here I found work that I’m interested in, a place where people care about me, and colleagues who truly want what’s best for shareholders and other crew. It was a surprising and welcome change from my prior experience in law.

What changes have you seen during your 23 years on the international desk?

Franquin: I was the first trader on the Vanguard European desk and the third person hired by Vanguard in Europe. The desk has certainly evolved over time. At first, the idea was to implement the U.S. model overseas but, at the time, European stock markets were not as integrated as they are now. There were 16 different markets, each with its own rules and structures—and we had to know how to trade in each. Finding feet-on-the-ground partners in each country was really the key in the beginning; building those partnerships helped us reduce the amount of time it takes to find trading partners, trim operating costs, and take advantage of newfound efficiencies that continue to create value for investors today.

How is Vanguard’s Equity Index Group structured? How is the team positioned as an international equity indexer?

Franquin: As index managers, a lot of what we do is data driven, but it’s the human-side decisions that really add value. We track tightly to our indexes but, even so, large trades require finesse and have the potential to impact investor outcomes. We have a unique organizational structure—our portfolio managers also act as traders—which gives us the power to respond to market volatility in real time within our trading strategies, to react to index events, and increasingly, to position ourselves ahead of a burgeoning industry of hedge fund managers who aim to profit from index funds’ trade-related inefficiencies. Our sophisticated portfolio management technique includes the use of simulated models and data-driven trade lists but also the knowledge that comes from person-to-person conversations with stockbrokers, from watching previous trades roll out, and from having an intimate knowledge of the types of events that can stymie models but point toward safe trade opportunities.

From an international perspective, we have feet on the ground in three continents, specifically in Australia, the U.K., and the U.S. We practice a pass-the-book, pass-the-trade model, which delegates certain decision-making responsibilities and execution powers to our regional traders. Because they are closer to the regional market, we expect local traders will have a better understanding of where opportunities exist, the risks associated with trading in a particular market, and the regional costs associated with execution.

How does Vanguard leverage its international investing experience and process to find opportunities to strategically add value for investors?

Franquin: Our process is very collaborative, and we rely heavily on the feedback that’s funneled up from our regional trader teams, as well as checks from our risk management team. We work together to identify efficient ways to handle an index event—be it from a stock split, a change in index composition, or a rebalance. It’s essential that we understand the risks associated with each trade, across each of our portfolios. Taxation is different across nations, specific trades may affect certain national economies more than others, and our network of partners on the ground are unique from region to region. We use the combined knowledge of our teams to understand the risks of each trade, how each can affect portfolio construction, and if we need to be aware of any potential hedging bets from the arbitrage community.

Having people on the ground is a real advantage. Those relationships between our analysts and local brokers help us in many ways. They give us the power to recognize and realize a fair price of execution. They grant us a close-up view of volume and liquidity. They give us resources to effectively spread a rebalance trade over time, which can significantly decrease market impact. They help us identify attractive allocations to initial public offerings. In short, our relationships help us manage risk across the reality of the market. The way we execute a specific trade can add up to hundreds of millions of dollars in value across all of our portfolios.

We also manage a shareholder-friendly securities lending program, which offers an additional source of revenue for our investors. Vanguard has a conservative, highly regarded securities lending program. Our value-oriented approach generally restricts lending strategies to high-demand securities to earn a higher premium per transaction and minimizes risk because only a small portion of the fund’s holdings are on loan at any point in time. And importantly, 100% of all lending revenues, net of expenses, are returned directly to the Vanguard funds to enhance shareholder returns.

What’s next for index investors? How might the industry change in coming years?

Franquin: What we see today is very different from how things looked when I joined the industry. And the world is still changing. Artificial intelligence (AI) could reshape and accelerate the way we make decisions. With AI, we can see how hedge fund managers are positioning themselves against indexers in real time. We can monitor a company that’s showing signs of a looming bankruptcy, even if those signs are coming from a different market. We’ll have access to, and be able to efficiently parse through, larger amounts of information, which could create new strategic opportunities. We are evolving into a world where all of this will be open to us. 

1 As of August 31, 2023. AUM figure includes assets invested in equity index trust and variable insurance products.
2 Vanguard is owned by its funds, which are owned by Vanguard’s fund shareholder clients.


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