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Investing Specialists

Did Vanguard Buy High and Sell Low?

It adopted a momentum manager when it was hot and fired him when he was not. But is that so wrong?

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You could argue that Vanguard bought  Vanguard Growth Equity (VGEQX) and Turner Investment Partners high and sold low. You could just as easily contend that the family just came to its senses.

Nearly nine years after Vanguard adopted a momentum growth fund managed by Turner and renamed it Vanguard Growth Equity, the family in January replaced the original subadvisor. It's tempting to accuse Vanguard of failing to practice what it preaches--that it hired and fired Turner at precisely the wrong times and didn't give its strategy time to work out over the long term.

Turner joined the Vanguard stable in 2000, near the peak of perhaps the biggest growth stock bubble of all time, an environment that suited firm founder and lead manager Robert Turner's high-octane approach. In the three years before it joined Vanguard, the Turner fund gained an annualized 40.7%, better than most of the large-growth category or relevant benchmarks. Now Vanguard has cut Turner loose in the midst of one of the worst bear markets in history, a climate that has been as hospitable to Turner's style as a Category 4 hurricane. The fund lost nearly 48% in 2008, and its annualized returns for all periods between one and 15 years ended Jan. 31, 2009, trail more than three fourths of its peers.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.