Vanguard PRIMECAP Fund Admiral Shares (MUTF:VPMAX)
Vanguard PRIMECAP Fund Admiral Shares (MUTF:VPMAX) has the distinction of being in a select group of Vanguard mutual funds that are closed to new investors. Fund companies often employ this tactic if they feel the size of the fund will adversely affect the long-term strategy and don’t want it to become bigger than they can handle. However, this one is definitely on my wish list for an ETF version.
This mutual fund invests in a diversified group of 130 large and mid-cap stocks that the manager feels offer superior growth potential. The hallmarks of the strategy are low turnover, low costs, and a long-term perspective. Vanguard PRIMECAP Fund Admiral Shares (MUTF:VPMAX) charges an expense ratio of 0.33% and has demonstrated an impressive track record as well.
The fund has beat both the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and Vanguard Total Stock Market ETF (NYSEARCA:VTI) over the last five years. The fund company website also lists the annualized 10-year performance at 9.41% annualized through 12/31/16. The fund has nearly $50 billion in total assets largely because of its superior performance story.
I know it’s a long shot, but this one would be an excellent actively managed U.S. equity ETF.
Vanguard Strategic Equity Fund Investor Shares (MUTF:VSEQX)
Vanguard Strategic Equity Fund Investor Shares (MUTF:VSEQX) is an actively managed stock mutual fund that focuses on small and mid-capitalization companies. The fund is managed by Vanguard’s own in-house Quantitative Equity Group. The purpose of this fund is to select smaller, more aggressive stocks with the potential for outperformance versus the benchmark. Currently the fund owns 368 stocks and has $6.8 billion under management.
This type of strategy can be strategically paired with a traditional large-cap ETF or mutual fund to broaden your exposure to the domestic stock market. Vanguard Strategic Equity Fund Investor Shares (MUTF:VSEQX) only charges a modest expense ratio of 0.18% and has been a top-performer throughout its history.
Vanguard lists the 10-year track record of this fund at +10.82% annualized over the last ten years through 12/31/16. It’s also managed to beat the Vanguard Extended Market ETF (NYSEARCA:VXF) quite handily over the last five years as well.
This type of low-cost, actively managed style would likely appeal to aggressive ETF investors that desire something more strategic than a typical index fund.
The Bottom Line
Porting a successful mutual fund to an ETF does not guarantee instant victory. Vanguard has more than likely considered this path already and chosen to take their time getting there. They may also be wary of the greater maintenance in running an active strategy in the ETF wrapper with the constraints of daily liquidity and transparency.
There have not been many stock-only or multi-asset ETFs that have successfully made it as active ETFs. Nevertheless, if anyone can do it, I would put my money on Vanguard to strike the right balance of cost and strategic positioning.
Note: This article is written by David Fabian and was originally published on the FMD Capital Management blog. FMD Capital Management is a fee-only investment advisor which provides daily updates on ETFs, portfolio strategies, and market insights. Contact them for a free portfolio review.
This post originally appeared on Investorplace.com.
