Vanguard partners with 22 external investment advisory firms to manage the majority of our active equity funds. With a strong record of outperformance versus benchmarks over long time periods,1 it’s clear that Vanguard has a knack for picking talent.
In the paper Active Edge: Winning the Zero-Sum Game, we detail what we look for when selecting active equity managers.
Our approach focuses on what we believe to be the key drivers of success—firm, people, philosophy, and process—and the resulting outcomes of portfolio and performance. In our view, the best active managers tend to be client centric, think long term, and have talented teams with diverse perspectives. They also rely on deep, differentiated research and bottom-up stock picking, not static factor bets.
“Our edge in active equity comes down to access to top investment talent at a low cost,” said Matthew Piro, global head of oversight and manager search at Vanguard and coauthor of the paper. “Combine that with Vanguard’s long-term orientation and the deep resources we dedicate to evaluating managers—it has been a proven recipe for success.”
1 On an asset-weighted basis, our active equity funds have delivered more than 60 basis points of annualized excess return over their stated benchmarks for the 10, 15, and 20 years ended December 31, 2023. Excess return is the difference between a fund’s NAV total return and the total return of its benchmark index. Results for other time periods will vary. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
The performance of each U.S.-domiciled Vanguard and non-Vanguard fund in the Morningstar database was compared with that of its stated benchmark using monthly return data ended December 31, 2023. The monthly returns for all Vanguard active equity funds, including those that were merged or liquidated during the period, were included in the performance calculations. The active equity portions of Vanguard balanced funds were excluded. Annualized asset-weighted excess returns were generated by calculating the asset-weighted cross-section monthly returns and then generating a time series set of returns. All fund performance data are net of fees.
Sources: Vanguard and Morningstar, Inc., as of December 31, 2023.
Notes:
- For more information about Vanguard funds, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
- All investing is subject to risk, including the possible loss of the money you invest.