This diversified fund of funds has gained 3.71% year-to-date.
Vanguard Diversified Equity Inv (VDEQX)
from The No-Load Fund Investor
The Vanguard Diversified Equity fund (VDEQX) has $1.5 billion in assets and invests in actively managed Vanguard funds. It uses U.S. equity funds only—no fixed income or international equity offerings. So, it’s a relatively aggressive, broadly diversified U.S. equity fund, not a balanced or global offering.
Over the three-year period ended February 27, 2015, Diversified Equity gained slightly less than 18%, just about matching the return of the S&P 500. Given that most actively managed U.S. stock funds lagged the S&P 500, that’s certainly a solid result. Over the past 12 months, Diversified Equity has trailed the S&P 500 by slightly less than three percentage points: 12.6% versus 15.5%.
However, given that small and midsize stocks have lagged large stocks significantly during this period, it’s neither surprising nor disappointing that Diversified Equity also has lagged.
Looking at the actual equity holdings within each of the fund’s constituents, Morningstar calculates that giant and merely large stocks combine for about 66% of the total portfolio. Mid-cap stocks account for about 26% of the rest, while small and microcap stocks account for about 8%.
Its largest holding is Vanguard Growth & Income (VQNPX). This fund invests in a collection of quantitatively selected large-cap stocks, and its sector weightings closely resemble those of the S&P 500.
With its large-cap constituent funds, Diversified Equity is neutral on style: 20% ‘blend’, 30% growth and 30% value (as percentages of the total portfolio). Its smaller-cap exposure, however, is on balance more oriented toward the growth style. Therefore, its total style exposure tilts modestly toward growth.
We think it is worthy of investment consideration.
Mark Salzinger, The No-Load Fund Investor, www.noloadfundinvestor.com, 800-706-6364, March 2015