The Low-Cost Leviathan Preps Its First One-Country Fund
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Tuesday, November 30, 2021

The Low-Cost Leviathan Preps Its First One-Country Fund

The Low-Cost Leviathan is preparing to create its first ever single-country fund for U.S. investors.

Mortimer J. "Tim" Buckley
President, CEO
Yesterday, the folks at Vanguard [profile] filed with the SEC to create the Vanguard China Select Stock Fund. The actively managed mutual fund is expected to launch in Q1 2022.

The new fund will be subadvised by two longtime Vanguard allies: Wellington Management Company LLP and Baillie Gifford Overseas Ltd. The PM team will include: Sophie Earnshaw, portfolio manager at Baillie Gifford; Mike Gush, partner at Baillie Gifford; and Bo Meunier, senior managing director, partner, and equity PM at Wellington.

Vanguard will offer the new fund in Investor Shares (for 83 basis points) and Admiral Shares (for 73 bps).

< JPMorgan Chase Bank, N.A. will serve as the new fund's custodian, while Vanguard itself will serve as distributor, dividend-paying agent, and transfer agent. An independent accounting firm has not yet been named.

"Vanguard research indicates that there is an opportunity for talented active managers to generate alpha in China's large, but inefficient, equity market," states Kaitlyn Caughlin, head of Vanguard's portfolio review department.

Jeff DeMaso, editor and research director with the Independent Adviser for Vanguard Investors and director of research at Adviser Investments, LLC, notes that, "Vanguard never boasts about managers' historical track records 7#8212; in fact they never mention them at all," and yet Vanguard is doing so in revealing this upcoming fund. So DeMaso digs into the track records of the fund's three PMs, and he concludes that "Vanguard has partnered with some talented managers in its first foray into a standalone country fund."

"I think the fund will prove popular though investors may be hesitant to take on the risks of this China-only strategy," DeMaso writes.

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