The top five sectors in this fund are: Consumer Discretionary (27.8% of assets); Technology (18.9%), Financial Services (16.9%), Industrials (11.1%) and Consumer Staples (8.6/5).
Vanguard International Growth (VWIGX)
From Moneyletter
If you look at Moneyletter’s international fund rankings, the top funds are dominated by China funds, with an emerging market and Latin America fund thrown in. But then there is Vanguard International Growth (VWIGX), the highest ranked diversified international fund. The fund recently replaced Vanguard Global Equity in the Vanguard Conservative portfolio.
Part of its success is that it has become more growth oriented over the past year. In July 2016, it removed one of three subadvisors on the fund and parceled out those assets (about 12% of the total) to the remaining two subadvisors. The dropped subadvisor was the most value conscious of the three; hence, the portfolio became a bit “growthier.”
Roughly 60% of the fund’s assets are managed by Baillie Gifford Overseas. The firm uses fundamental analysis to identify attractive long-term investments in high-quality companies with above-average growth. Key factors in stock selection include sustainable competitive advantage and earnings, and free cash flow growth.
The remaining assets are managed by Schroder Investment Management, which also uses bottom-up stock research, emphasizing growth at a reasonable price. It splits its portion of the portfolio between core stocks (60%-70% of assets), and noncore large-cap stocks located in markets expected to have strong near-term returns. The former are names it expects to hold for a number of years, while the latter are short-term opportunistic plays.
The fund has significant weightings in the more growth-oriented sectors of consumer discretionary and technology. It also has an outsized (24% of assets) exposure to emerging markets compared to Morningstar’s foreign large growth category and the MSCI ACWI Ex USA Growth Index benchmark.
Within that emerging markets exposure is a nearly 19% stake in China. The fund’s top two positions, Tencent Holdings (internet services) and online marketplace Alibaba Group (5.4% and 4.9% of assets, respectively) both hail from China, and have advanced 77.6% and 96.7%, respectively, this year. Meanwhile, the fund also commits to its best bets, with 30% of assets in its top ten holdings. It holds minimal cash.
This year through the end of September, Vanguard International Growth has gained 37.4%, outpacing more than 90% of its category peers. Its 10.3% return for the trailing three-year period also bests more than 90% of the category.
Walter Frank, Moneyletter, www.moneyletter.com, 800-890-9670, October 2017