Proxy proposals would modestly reduce expenses.
Yesterday Vanguard announced two proxy proposals designed to give the firm greater flexibility in choosing advisors. The proposals were among several others, including the election of two new trustees, Sarah Bloom Raskin and Deanna Mulligan.
Kevin McDevitt, CFA, is a senior analyst covering equity strategies on Morningstar’s manager research team.
The two proposals related to advisors would allow Vanguard to change a fund's subadvisors without first getting shareholder approval via proxy. Skipping this step would save Vanguard considerable time and expense when adding or subtracting subadvisors. They already have this approval with 48 funds; this new proposal would simply extend it to the rest of the lineup.
This change would give shareholders less direct oversight over Vanguard's funds, but as a practical matter, choosing subadvisors is ultimately best left to the firm itself. Of course, shareholders always have the option of voting with their feet if they don't approve of a manager change.
The second proposal would give Vanguard the freedom to use its non-U.S. subsidiaries as advisors on U.S.-based funds. Again, Vanguard would then be allowed to make such changes without seeking shareholder approval. This proposal would give the fund greater freedom in managing funds, foreign mandates in particular.