WHY FIRE ONE AND HIRE ANOTHER?

Just read in Barron’s magazine “Vanguard Ousts AllianceBernstein Team”. According to the article Alliance Bernstein has been managing two thirds of the Vanguard U.S. Growth fund since 2001. The article quotes a Morningstar analyst, Katie Rushewicz describing the fund as “Persistently poor performance and management changes mar Vanguard US Growth; this fund has a dismal history”. According to the article the fund has underperformed both its large growth category and the S&P 5000 in the past 5 and 10 year periods.

Coincidentally, in January 2010, Vanguard hired Lew Sanders, who we have written about in prior blogs, and his new firm Sanders Capital, to co-manage the Vanguard Windsor Fund II. This fund also appears to be suffering from a lackluster performance record year to date.

Possibly Vanguard should try to evaluate the possible connection of Mr. Sanders to the lackluster years the Vanguard US Growth fund incurred under his firm’s guidance. Lew Sanders was Chief Investment Officer in charge of Alliance Bernstein investment decisions during what seems to be the majority of AB’s management of the fund. Stay tuned...