Vanguard bolsters global active talent with Melbourne-based contingent
Vanguard | 24 August 2017
Global fund manager Vanguard has reminded investors of the continuing role of human expertise and talent in active funds management as it grows its quantitative equities team in Australia.
Vanguard's Quantitative Equity Group, which manages AUD $43.8 billion in actively managed assets globally, is expanding its team in Australia as part of the growth of its international operations.
Michael Roach has relocated from Vanguard's US headquarters in Malvern, Pennsylvania, to Vanguard's trading hub for the Asia-Pacific region in Melbourne, to take on the role of Head of Quantitative Equity Group, Australia. Mr Roach, a 19-year Vanguard veteran, has been a portfolio manager with the Quantitative Equity Group for eight years, where he has worked across Vanguard's suite of quantitative active strategies in the US.
Also joining the local quantitative management team is Assistant Portfolio Manager Janel Jackson, who previously held positions in investment search and oversight for traditional and alternative active mandates, and as Chief of Staff for Vanguard's global Chief Investment Officer, Tim Buckley, who has been named as successor to current chief executive officer, Bill McNabb, effective January 2018.
The Quantitative Equity Group (QEG), founded in 1991, specialises in quantitative-style active management, which uses sophisticated modelling and computation to identify opportunities for actively managed portfolios. Vanguard's process focuses on fundamental business as well as market and economic-related data, employing systematic, scalable quantitative models developed by its researchers to build portfolios rather than aggregating specific stock recommendations made by more traditional analysts.
Having introduced its active management capabilities to the Australian market earlier this year, Vanguard's active product line up focuses on quantitative products managed by QEG experts based in the Australian business.
Mr Roach and Ms Jackson will be supported by QEG's US-based quantitative research team and a global trading team. Mr Roach and Ms Jackson will both service Vanguard's suite of active funds in Australia, and will become a global part of Vanguard's active expertise. In addition, the Australian QEG team includes Dr Frank Polanco, who has been a Portfolio Manager with Vanguard Australia for four years. Dr Polanco is currently on secondment, where he is embedded in the US-based quantitative equities team.
“Building out our team in Melbourne highlights the critical role that people play in the success of our quantitative active strategies,” Mr Roach said.
“It seems as though we're hearing and reading more and more lately about how so-called robots and automated processes are taking over from people in managing active strategies. Leveraging technology is hugely important to our quantitative systems at Vanguard, but people remain an indispensable part of our process, as is the case with our index funds.
“Our global quant team includes highly talented researchers and analysts who build the sophisticated models that we use to implement our strategies. These models are continuously being refined to make our strategies more robust for a market that experiences constant change. This increases their efficacy and efficiency, leading to a greater likelihood of achieving their long-term goals.
“People are essential in providing an important level of risk control. A model might be able to tell us the optimal portfolio for its investment strategy on a given day, but it takes a layer of human insight to make sure we have rigorous controls in place to make sure we aren't just flying on autopilot.
“Implementing equity strategies also relies on talented traders, who can execute our approach in the most efficient way possible. This closely aligns to our index portfolios, but where those funds rely on sophisticated trading techniques to track a benchmark as closely as possible, our quant funds rely on our traders to implement our optimal active model as closely as possible. We see technology as an important tool for our traders, rather than a substitute.”
Vanguard Australia offers four actively managed funds, which collectively hold more than AUD $178 million. Two of these are factor funds that implement minimum volatility and value strategies, one is a quantitative active fund that aims to provide outperformance of a broad global equities benchmark, and the final is a managed payout strategy that aims to make regular income distributions while preserving capital, keeping returns at or above inflation.
As with its suite of index funds, Vanguard's range of active strategies are built on the principles of broad diversification, long-term focus and low costs. Vanguard's investment philosophy is that these traits are equally applicable across index and active funds as key principles that give investors their best chances of investment success.