And another baton is passed amongst Vanguard portfolio managers.
The index giant announced today that Jack Granahan, portfolio manager of the multi-managed Vanguard Explorer Fund, will hand off management responsibilities at the end of 2013.
The 77-year-old Granahan, who is co-founder and chairman of Granahan Investment Management, will remain with the firm as chairman, while his PM duties will be assumed by other portfolio managers at the firm.
Meanwhile, the Explorer fund will be managed by the firm’s chief investment officer, Gary Hatton, and CEO Jane White. Hatton and White are co-founders of Granahan Investment Management and have been co-managers of the Explorer Fund since 1998 and 2000, respectively.
The management change is only the latest to hit a Vanguard product, according to Daniel Wiener, the editor of The Independent Adviser for Vanguard Investors. Other notable exits include Precious Metals & Mining Graham French, who stepped down in November; International Growth manager Virginie Maisonneuve, who left Schroder's to join PIMCO; and Mitch Milias of PRIMECAP Management who announced that he'll pull from active management of PRIMECAP and PRIMECAP Core.
Also, Bob Auwaerter recently announced that he will be leaving his duties as head of Vanguard’s fixed income department at the end of March 2014.
Wiener wrote this on the subject of all of these changes:
Vanguard Brain Drain - Managers Dropping Like Flies
Who’s next?
The final few months of 2013 have been rough ones for continuity at Vanguard. Today’s announcement that Explorer’s longest-tenured manager, Jack Granahan, will be giving up portfolio responsibilities at year-end was just the latest news of manager loss out of Valley Forge. (An interesting side note, while Vanguard now says that Granahan Investment Management colleagues Jane White and Gary Hatton have been co-managers on the fund since 2000 and 1998 respectively, neither was actually listed or disclosed as a portfolio manager until sometime in 2011. While I have little doubt that both were intimately involved in portfolio management duties at Explorer and in other Granahan-run portfolios, it’s funny how history gets rewritten despite more than a decade of inadequate disclosures.)
Precious Metals & Mining’s Graham French stepped down in November, handing off the fund to Randeep Sommel, who’d only just been named co-manager in January.
International Growth’s Virginie Maisonneuve, ex of Shroder’s, went on “garden leave” from her firm at the end of October upon announcing she’d be decamping for a role as PIMCO’s Global Health of Equities Portfolio Management. Vanguard never mentioned the departure. Her name was simply excised from fund materials.
PRIMECAP Management’s Mitch Milias also announced he’d be withdrawing from active management at PRIMECAP and PRIMECAP Core. (Fund co-manager and PRIMECAP co-founder Howard Schow passed away in 2013 as well.)
Bob Auwaerter gave notice last month that he’d be leaving his duties as head of Vanguard’s fixed income department at the end of March 2014.
And lest we forget, Sandip Bhagat, the head of Vanguard’s Quantitative Equity Group, who joined the firm in 2009, left unceremoniously at the end of 2012, though the announcement was held until January of this year. Plus, Health Care’s Ed Owens turned over his fund to co-manager Jean Hynes at year-end 2012.
What’s going on? Is Vanguard in revolt? I don’t believe so. Let’s call this evolution, rather than revolution.
That said, the guessing game now shifts to other Vanguard managers including Windsor II’s Jim Barrow who seemed poised to pull back from duties there and atSelected Value, but has stayed on as his new co-managers, Jeff Fahrenbruch and David Ganucheau at Windsor II, have gotten their collective feet wet.
Of course, Vanguard has worked to downplay the impact of manager moves with its multi-manager strategy at funds like Explorer, Morgan Growth, International Growth, Windsor II and the like. Ever since the days of star manager John Neff, whose Windsor soared and swooned, Vanguard has tried to make it seem as though the impact of one individual manager just doesn’t make a difference—and on its multi-managed funds I’d say they have probably gotten it right as the soup can only get so muddled as you throw more cooks into the kitchen.
I’ve got my eye on these changes but the most important ones will be those of individual managers with great track records running funds solo, or nearly solo. I would be particularly unhappy, for instance, to see Don Kilbride leave Dividend Growth, or for that matter, to see the fund become multi-managed. Mark Giambrone, who is Barrow’s co-manager on Selected Value and will no doubt take over the fund upon Barrow’s retirement is also someone I’d hate to see leave.
So the question remains: Who’s next?
Here is the press release for Granahan's announcement.
Company Press Release
LONG-TENURED MANAGER OF VANGUARD EXPLORER™ FUND
TO STEP BACK FROM DAY-TO-DAY INVESTMENT MANAGEMENT
VALLEY FORGE, PA. (December 16, 2013)—Vanguard announced today that John “Jack” J. Granahan—a portfolio manager with the multi-managed $12.4 billion Vanguard Explorer Fund, the $1.3 billion Vanguard Variable Insurance Fund - Small Company Growth Portfolio, and the Irish-domiciled $125 million Vanguard U.S. Discoveries Fund—will hand off management responsibilities at the end of 2013.
Mr. Granahan, 77, co-founder and chairman of Granahan Investment Management, Inc., will remain with the firm as chairman. His investment responsibilities will be assumed by other portfolio managers at the firm, including the chief investment officer, Gary C. Hatton, and CEO, Jane M. White. Mr. Hatton and Ms. White are co-founders of Granahan Investment Management and have been co-managers of the Explorer Fund since 1998 and 2000, respectively.
“I’d like to thank Jack on behalf of Vanguard and our shareholders,” said Vanguard CEO Bill McNabb. “His wisdom, investment acumen, and experience greatly contributed to the success of our shareholders over four decades. As one of Vanguard’s longest-tenured managers, he leaves behind a great legacy and team, who we are confident will continue to serve our shareholders well.”
Prior to co-founding the firm that bears his name in 1985, Mr. Granahan managed the Explorer Fund from 1970 until 1979 at Wellington Management Company, LLP. While at Wellington, he also managed Vanguard Morgan™ Growth Fund when it was introduced in 1968.
Vanguard tapped Granahan Investment Management to manage Vanguard Explorer II Fund when it was introduced in 1985, and the firm was retained to manage a portion of the Explorer Fund when it merged with the Explorer II Fund in 1990. Granahan Investment Management oversaw nearly $4 billion in assets as of September 30, 2013, including $3.4 billion for Vanguard.
Other managers of the Explorer Fund are: Century Capital Management, LLC; Chartwell Investment Partners, L.P.; Kalmar Investment Advisers; Stephens Investment Management Group, LLC; Wellington Management Company; and Vanguard Equity Investment Group. Vanguard currently uses a multi-manager approach for 18 funds. Vanguard believes that a fund with multiple managers can benefit from the diversity of thought and investment ideas.
About Vanguard
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages more than $2.4 trillion in U.S. mutual fund assets, including more than $300 billion in ETF assets. The firm offers more than 160 funds to U.S. investors and more than 100 additional funds in non-U.S. markets. For more information, visit vanguard.com.
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