Too Many Chefs In the Windsor II Kitchen?
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Thursday, January 14, 2010

Too Many Chefs In the Windsor II Kitchen?

As previously reported by The MFWire, Vanguard added a sixth manager –- Sanders Capital –- to its Windsor II Fund sub-advisory lineup on Wednesday. In Thursday's Fund Track column, the Wall Street Journal's Jane J. Kim questions the move and the fund firm's multi-manager approach.

According to the Journal, 15 of Vanguard's 27 actively managed equity funds count multiple managers –- a strategy that has been raising a few eyebrows among fund managers who closely watch the Valley Forge, Pennsylvania-based behemoth. So while some critics, such as Daniel Wiener, a manager of an investment firm heavily invested in Vanguard, claim Vanguard is “adding too many 'chefs' in the kitchen", others defend the strategy as a means of offsetting risk and reducing portfolio volatility.

As Daniel Culloton, associate director of fund analysis at Morningstar points out, however, the quality of each manager is truly what is at stake rather than the quantity.

“If you add a bunch of mediocre managers to a fund, that could dilute performance,” Cullotn told the Journal. “But if you add a bunch of good managers to a fund who don't have a lot of overlap between their portfolios, theoretically it shouldn't.”

Sticking to its guns –- and to its affinity for multiple managers -– Vanguard plans to launch the Explorer Value Fund, an actively managed small-to mid-cap value fund, in the first quarter of 2010.

Also noted in the column and previously reported by The MFWire, the Journal reports on the impending integration of Wells Fargo Funds Management and Wachovia's Evergreen Investments -- a union scheduled to transpire in July.

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