Morningstar Magazine - August/September 2018 - 53

Strategies

Good by Any Measure
Vanguard Global Equity earns an upgrade.

BEST IDEAS: M ANAGER

Kevin McDevitt

Vanguard Global Equity VHGEX

This article is adapted from the fund's Morningstar Global Fund Report dated
June 8, 2018.

Stats 05/31/2018

Vanguard Global Equity VHGEX has benefited from its increasing growth
orientation, faring well even against growth benchmarks and earning the fund
an upgrade to a Morningstar Analyst Rating of Silver.

Morningstar Analyst Rating
*

Morningstar Category
World Large Stock

Expense Ratio
0.48%

Fee Level
Low

5-Yr Annlzd Return
10.44%

5-Yr % Rank in Cat
21

Morningstar Pillars 05/31/2018

The fund's three remaining subadvisors continue to generate excellent results.
Since Vanguard removed value-oriented Alliance Bernstein in August
2012, the fund has gained 13.1% annualized through May versus 11.1% for its
MSCI ACWI All Cap benchmark. Despite its migration into growth territory
during that time, the fund's volatility was slightly below the index's. In fact, the
fund's downside-capture ratio versus the benchmark was just 91.6%.

Process
∞ Positive

Performance
∞ Positive

People
∞ Positive

Parent
∞ Positive

Price
∞ Positive

Growth of 10K 05/31/2018

$14K
Vanguard Global Equity

That said, migrating toward growth has been a big advantage for the fund
over the past six years. The MSCI ACWI Growth Index's 12.4% annualized
return crushed the MSCI ACWI Value Index's 9.1%. The fund's own
growth orientation shows in average P/E and P/B ratios that are both greater
than the all-cap index's.

10
Morningstar Global Markets GR
06/2015

Yet the fund remains less growth-oriented than the MSCI ACWI Growth Index.
The portfolio's average price multiples are lower across the board. And
while Amazon.com AMZN, Alphabet GOOG, and Apple AAPL are among its top
10 holdings, its 21% technology stake is well below the growth index's 29.8%
weighting and matches the world large-stock Morningstar Category average.

06/2016

8

06/2017
Morningstar Ratings 05/31/2018

Morningstar Style Box 05/31/2018
Micro Small Mid Large Giant

But the fund's growth bias doesn't explain all of its success. That's demonstrated
in part by the fact that its 13.1% annualized return since August 2012 beat the
MSCI ACWI Growth Index's 12.4% gain. To be sure, this is an imperfect
comparison given this fund's all-cap nature and its mid- and small-cap holdings
on average gave it a boost over large caps during that period. As of March,
the fund had 29% of its assets in mid- and small-cap stocks, which was greater
than the MSCI ACWI All Cap Index's 24.3%.

13.02
12.69
12

Fund Centroid
weighted avg. of Period
equity holdings
3-Yr

Mstar
Return

Above Avg Average

QQQQ

Zone
75% of fund
equity holdings

5-Yr

Above Avg Average

QQQQ

10-Yr

Average

Mstar
Risk

Above Avg QQQ
QQQQ

Overall Rating

Deep Core Core Core High
Value Value
Grwth Grwth

Mstar
Rating

Top 5 Sectors 03/31/2018

Sectors

■ Fund

❙ Category Average

y Financial Services

Investors should be aware that the fund's growth leanings and midand small-cap holdings could create short-term volatility. But it has significant
long-term advantages in its three subadvisors as well as its low cost. K

a Technology

Kevin McDevitt, CFA, is a senior analyst with Morningstar Research Services.

d Healthcare

3-Yr High 3-Yr Low

19.01

21.47

21.59

20.77

18.43

21.30

22.08

18.03

12.84

12.17

12.71

11.66

11.31

9.87

12.70 12.89

t Consumer Cyclical

10.74 11.66

p Industrials

11.31 11.57

0%

10

20

30

40

global.morningstar.com/Morningstarmagazine

53


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Table of Contents for the Digital Edition of Morningstar Magazine - August/September 2018

Contents
Morningstar Magazine - August/September 2018 - Cover1
Morningstar Magazine - August/September 2018 - Cover2
Morningstar Magazine - August/September 2018 - 1
Morningstar Magazine - August/September 2018 - 2
Morningstar Magazine - August/September 2018 - Contents
Morningstar Magazine - August/September 2018 - 4
Morningstar Magazine - August/September 2018 - 5
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Morningstar Magazine - August/September 2018 - Cover3
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