Skip to Content
Fund Times

Vanguard Again Slows Inflows at Capital Opportunity

Gold-rated Vanguard Capital Opportunity is closing to new investors, apart from those enrolled in Vanguard Flagship Services or Vanguard Asset Management Services. Separately, MFS and Vanguard roll out low-vol funds, and American Century Appoints 2 Co-CIOs.

On Dec. 9, Vanguard announced that the Gold-rated, $11.5 billion  Vanguard Capital Opportunity (VHCOX) is closing to new investors, except those enrolled in Vanguard Flagship Services or Vanguard Asset Management Services, and that the firm is reinstating a $25,000 annual limit for new purchases by existing shareholders. These moves come just eight months after Vanguard reopened the fund to new individual investors and removed the annual limit on purchases, the first time since 2004 that Vanguard had made the fund available to newcomers. The Capital Opportunity fund has been managed since 1998 by the Primecap team, which has achieved one of the fund industry's best long-term records with  Vanguard Primecap (VPMCX), which has been closed since 2009 along with sibling  Vanguard Primecap Core (VPCCX). Capital Opportunity saw $862 million in net inflows in the first 11 months of 2013, helped by a great year in which it has gained more than 35% and ranked near the top of the large-growth category.

Sequoia to Slow Inflows Further
Check out our special Fund Times article from Tuesday, Dec. 10 regarding Gold-rated  Sequoia Fund (SEQUX). Effective immediately, the fund has closed entirely to new investors. This follows a soft close that the fund instituted in January 2012.

Vanguard Rolls Out Global Minimum Volatility Fund
On Thursday, Dec. 12, Vanguard launched a new actively managed fund, Vanguard Global Minimum Volatility VMVFX, which will invest in stocks around the globe. The fund has two share classes, Investor and Admiral, with expense ratios of 0.30% and 0.20%, respectively.

Vanguard had been considering low-volatility options for at least three years. Unlike existing offerings in the low-volatility exchange-traded fund space, however, Vanguard's fund is actively managed as opposed to passively managed--somewhat surprising considering Vanguard's dominance and expertise in index funds. The fund isn't subadvised, either, as many of the firm's actively managed funds are. Instead, it will be run by the firm's quantitative team, the active equity group, which is now under fairly new leadership in John Ameriks. Ameriks, who assumed his current post in early 2013, is a Vanguard veteran and was instrumental in designing Vanguard's target-date funds and endowmentlike managed-payout funds. The new fund's managers are James Troyer, James Stetler, and Michael Roach.

This fund will look to invest in names that have exhibited lower volatility relative to other stocks in the FTSE Global All-Cap Index (USD Hedged). It also will consider correlations among stocks when constructing the portfolio. The FTSE Global All-Cap Index includes emerging markets, which can be volatile in and of themselves, but which also can provide diversification benefits and potentially reduce a broad portfolio's volatility over the long haul. The managers will hedge most of the portfolio's currency exposure; doing so can have a meaningful impact on a fund's volatility (and performance relative to actively managed global-equity peers). Although the fund will be actively managed, Vanguard's active equity group typically aims for returns that are highly correlated with designated benchmarks.

MFS Rolls Out Low-Volatility Funds
MFS made its first foray into low-volatility investing this month, launching MFS Low Volatility Equity (MLVAX) and MFS Low Volatility Global Equity (MVGAX). The former will target a volatility level that is 20% lower than that of the S&P 500 Index over a full market cycle, while the latter will target 30% less volatility than the MSCI All Country World Index. Market gyrations in recent years have many investors looking for such lower-volatility options, and multiple fund companies have responded with similar products.

The two new MFS funds are managed by the firm's blended research team, which combines stock rankings from the firm's analysts with a quantitative model to fit a certain goal, such as dividend yields or low volatility (as in these two funds' case). This team has been gaining prominence at the firm, having taken over a sleeve of moderate-allocation fund  MFS Total Return (MSFRX) in April 2013.

American Century Appoints Co-CIOs
At American Century, two chief investment officers will take the place of one.

The fund shop had been looking for a new CIO since the April 2013 departure of Enrique Chang, who went to Janus. The search ended on Tuesday, Dec. 10, when American Century announced the appointment of co-CIOs Victor Zhang and David MacEwen.

While Zhang will focus on the equity side and MacEwen the fixed-income investments, they have joint oversight over firmwide investment-management decisions such as how to allocate resources across the firm, and both will serve on the management committee.

MacEwen, who has worked at American Century since 1991, assumes his new role immediately. Zhang, who is moving over from Wilshire Funds Management, begins on Feb. 17, 2014.

American Century president and CEO Jonathan Thomas told Morningstar that at first he was planning to choose a single CIO to replace Chang, but as the search continued and many qualified candidates arose, the idea of co-CIOs took hold, especially with these candidates.

Below the level of the overall CIO, American Century has CIOs for its various strategies such as large-cap U.S. growth or international equity, and MacEwen has been the fixed-income CIO at the firm since 2001, 10 years after his arrival. Zhang was president and CIO at Wilshire Funds Management where he worked for eight years. Prior to that, he served as director of investments as well as other roles with Harris myCFO Investment Advisory Services, a subsidiary of Bank of Montreal.

RidgeWorth Employees to Buy RidgeWorth From SunTrust for Up to $265M
On Wednesday, Dec. 11, RidgeWorth Investments announced that employees of RidgeWorth have teamed up with private equity firm Lightyear Capital LLC to acquire RidgeWorth from SunTrust Banks for up to $265 million.

As of Nov. 30, RidgeWorth had $50.6 billion in equity and fixed-income assets, with five wholly owned investment boutiques and one minority-owned boutique.  Ridgeworth uses its affiliated investment boutiques--which include its minority stake in Zevenbergen Capital Investments and its five wholly owned boutiques, Ceredex Value Advisors, Certium Asset Management, Seix Investment Advisors, Silvant Capital Management, and StableRiver Capital Management--as the investment advisor to the RidgeWorth Funds.  Among RidgeWorth's largest funds are the Bronze-rated, $8.7 billion  RidgeWorth Seix Floating RT High Income (SFRAX) and the $3.55 billion RidgeWorth Mid-Cap Value Equity (SAMVX).

Chuck Royce Pledges $50K to Charities Whose Board Members Invest in Davlin Philanthropic
According to a Dec. 4 article in The Wall Street Journal, Royce Funds founder Charles M. "Chuck" Royce has adopted a novel approach to helping gather assets into a tiny, charitable-giving-themed mutual fund run by a friend and former Royce Funds analyst.

The paper reported that Royce has made a challenge to nonprofit executives to invest in Davlin Philanthropic , which as of Dec. 12 had just $9.2 million in assets. The five-year-old fund, which is managed by former Royce Funds analyst William Davlin, charges a hefty 1.5% expense ratio but sends at least one third of that revenue to some charities.

Now, Royce is pledging to donate $5,000 to each of 10 selected charities, The Wall Street Journal reported, if at least three board members or executives of the charity invest in the Davlin fund.

The attention from the article has not resulted in any meaningful asset inflows over the past week.

Senior fund analysts David Kathman, Kathryn Spica, and Gregg Wolper and fund analysts Robert Goldsborough and Flynn Murphy contributed to this report.


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