Its global equity fund is relatively small but the returns are much bigger than two of its best known peers
Thursday 09 Apr 2020 Author: Daniel Coatsworth

Investment trusts Alliance Trust (ATST) and Witan (WTAN) are two popular funds in the UK. Investors like the way they use a panel of third party fund managers, deemed to be the cream of the crop, to pick stocks from around the world. They often get all the attention in discussions about multi-manager investment funds, but there is another player in the market which is actually delivering  better performance.

Vanguard is best known for its low-cost passive funds, particularly the LifeStrategy range which feature different mixes of stocks and bonds. However, its active fund range is not well known in the UK. That could change as its funds build up a longer track record and certainly if they maintain their outperformance.

The closest product in Vanguard’s active range to Alliance Trust and Witan is Vanguard Global Equity (BZ82ZT6). This is a portfolio of approximately 200 stocks from around the world picked and managed by Baillie Gifford and Wellington.

In comparison, Alliance Trust uses a panel of nine different equity managers, bringing together their best ideas in a 200-strong portfolio. Witan uses a panel of 10 managers to run 90% of its portfolio. The rest is invested directly by Witan’s executive team.

Since launch on 25 May 2016, Vanguard Global Equity has achieved 40.8% total return. In comparison, Alliance Trust has delivered 30.2% and Witan 14.3%. The MSCI World index has returned 36% over the same time period.


While Vanguard isn’t really know for active funds in the UK, it is the third largest active manager in the world. The business started with active funds when it was founded in 1975 by Jack Bogle. Prior to setting up Vanguard he led asset manager Wellington which might explain why that company is on the panel for the Global Equity fund.

‘Wellington is an incredible active manager,’ says Andy Surrey, a senior manager at Vanguard. ‘It has a well-resourced research platform and a culture of sharing ideas. The team meet every day and a 25-year-old’s idea has the same value as a 55-year-old’s. Everything is shared on a flat basis. We use Wellington more than any other sub-adviser on Vanguard products.’

Vanguard’s active funds typically only use a panel of two or three asset managers, unlike Alliance Trust and Witan which have significantly more. Larger panels create the opportunity to mix lots of different investment styles, whereas small panels mean the fund is more focused which can work to its advantage if the managers are good at picking stocks, but work against it should the managers make mistakes.

Surrey says Vanguard meets 200 potential managers for its funds each year and their performance acts as a benchmark for the incumbent managers on its products.


Growth investing specialist Baillie Gifford is the joint manager alongside Wellington on Vanguard Global Equity as well as co-running Vanguard Active UK Equity (BK1XRK6) and Vanguard Global Emerging Markets (BZ82ZY1).

‘We’ve worked with Baillie Gifford since 2003, a time when the growth investing style was getting absolutely killed,’ explains Surrey. ‘Value was racing ahead. Baillie Gifford was losing quite a few large clients and we came in and secured its services at a low cost.’ The asset manager is now highly respected in the industry and by retail investors who flock to its products including Scottish Mortgage Investment Trust (SMT).

In addition to Baillie Gifford, Vanguard Global Emerging Markets is managed by Pzena Investment Management and Oaktree Capital. Pzena is a deep value investor whereas Oaktree is the largest distressed securities investor in the world and co-chaired by Howard Marks whose regular memos are essential reading. ‘Oaktree is more eclectic in its approach and is extremely risk aware, always thinking about the downside,’ says Surrey.


A lot of investors assume multi-manager investment funds come with high fees to pay the experts doing all the work. This is certainly not the case with the Vanguard products nor Alliance Trust, however Witan’s 0.87% ongoing charge including performance fees is higher than the 0.7% average for the AIC Global sector, based on research by the AIC in October 2019.

Alliance Trust charges 0.64% a year whereas Vanguard Global Equity has a significantly lower ongoing charge of 0.48%.

‘Our focus is keeping costs low as well as identifying the best talent to run the portfolios and being very patient,’ says Surrey. ‘If you try and market a product based on past performance, as soon as you’ve had a bad year you’ll suffer huge outflows.’

Over 10 years, Vanguard believes investors in its Global Equity fund would save £1,204 in charges compared to the average similar fund, based on a £10,000 investment and 5% annual return.

The Global Equity fund may only have £67.5m worth of assets under management – only a fraction of the £2.4bn with Alliance Trust and £1.7bn with Witan – yet there is a lot to like about the product. Anyone thinking of adding a global fund to their portfolio should certainly give it some consideration.

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