Vanguard Removes Oaktree From $785M Fund

The Vanguard Group on Monday announced its decision to drop Oaktree Fund Advisors LLC as one of the investment advisers for a $785 million emerging markets stock fund.

Oaktree will be removed from the Emerging Markets Select Stock Fund, designed to provide a “low-cost way to gain equity exposure to emerging markets.” Oaktree’s allocations will be split among two investment advisers: Baillie Gifford Overseas and Pzena Investment Management, according to the announcement.

“Vanguard’s manager research team conducts ongoing reviews of current and prospective investment advisors, looking beyond short-term performance to focus on the drivers of long-term success for investors,” the announcement stated. “As part of this review process, Vanguard determined that changes to the advisory structure would best serve current and future shareholders of the fund.”

After the move, the adviser target allocations for the fund will be: Baillie Gifford 37.5%, Pzena 37.5% and Wellington Management Co. LLP 25%. Oaktree will not be an investment adviser on any Vanguard funds, according to a spokesperson.

In addition, the expense ratio of the fund will decrease to 0.79% from 0.80%, while the objectives of the fund will remain the same.

Since inception in 2011, the fund has outperformed Vanguard’s benchmark for it—the FTSE Emerging Index—with a return of 2.88%, compared with the benchmark’s 2.74%, according to the company’s tracking. But so far in 2024, the fund had underperformed the benchmark with a return of 6.00%, compared with the benchmark’s 8.98%.

Vanguard is known for relatively lower-cost, passive investment strategies and holds the No. 2 spot in the 2023 PLANADVISER DCIO Survey in terms of assets managed. Among firms that participated in the survey, BlackRock led the list of asset managers in DC plans at $1.164 trillion, followed by Vanguard at $1.161 trillion and State Street Global Advisors at $579 billion.

Oaktree Fund Advisors had $9.5 billion in assets under management as of its March 2024 ADV Form filing. Its parent company, Oaktree Capital Management, has $193 billion in AUM, according to its website.