Vanguard launches active equity fund

Vanguard launches active equity fund

Vanguard has launched an active UK Equity fund set to be managed by Baillie Gifford and Marathon Asset Management.

The fund, launched yesterday (October 15), is designed for investors looking to invest in growing UK companies for the long-term — for more than five years — and is aimed at outperforming the FTSE All-Share index.

The ongoing charge for the fund is 0.45 per cent — three basis points lower than Vanguard’s Global Equity, Equity Income and Balanced funds.

Marathon and Baillie Gifford have a 50/50 split on sub-advising the fund. Marathon will identify the UK companies which benefit from the flow of investments in and out of UK industries while Baillie Gifford will look to find companies with growth potential.

Baillie Gifford has its own UK Equity fund which has consistently outperformed its peers since its launch in 2014.

Source: Hargreaves Lansdown. Orange - Baillie Gifford's fund. Yellow - UK All Companies. Blue - UK Equity Income.

Although Vanguard manages more than £1trn in active strategies, the asset manager is more well-known for its passive funds.

In August Vanguard’s LifeStrategy 40% Equity fund — a passive fund — was the leading fund for adviser sales overall on the FundsNetwork platform as well as an Isa bestseller.

The asset manager’s launch into UK Equities comes at a time when investors are moving funds out of UK shares and into lower-risk assets as political uncertainty lingers and investor sentiment remains low.

In fact Morningstar data showed equities had the highest level of net outflows globally for the month of August.

Robyn Laidlaw, head of UK distribution for Vanguard, said: “The Vanguard Active UK Equity fund embodies the three elements Vanguard believes are crucial to giving investors the best chance of investment success: top investment talent, with a long-term approach, delivered at a low-cost.

“The fund blends the strengths and expertise of our sub-advisers, and we believe investors will benefit from the combination of two top quality firms with decades of UK investment experience, high quality portfolio management teams, and distinctive investment management approaches.”

Ms Laidlaw said although Vanguard was a “pioneer” in passive investing, active management had been part of its approach since its inception.

Tom Sparke, investment manager at GDIM, said: “It is interesting to see Vanguard rolling out their active strategies to the UK equity market, this has worked well in other sectors so far.

“This fund blends different management styles which may mean that investors can use this as a one-stop-shop for their UK exposure.”

Mr Sparke said Baillie Gifford should be “excellent custodians” for the long-term quality growth style.

He added: “I would hope that the timing of the launch, into what could be a turbulent market, signals that they will be focusing on the long-term and therefore are unworried about shorter-term events.