After Jack Bogle was fired by Wellington Management Co. in 1974, he didn’t wash his hands of his old employer. Instead he retained the firm to run money for his startup, Vanguard Group. Today those funds are beating almost all of their peers.
Wellington manages six large active mutual funds with a total of $240 billion in assets for Vanguard. The six have outperformed 87 percent of their peers on average over 10 years, according to data compiled by Morningstar Inc. The Vanguard Health Care Fund is the top-performing U.S. mutual fund over the past 30 years, thanks to Wellington.
The funds tend to thrive in difficult markets -- and lag behind during robust times -- by focusing on high-quality stocks and bonds. Over the past year, as the Standard & Poor’s 500 Index is little changed, three of the Wellington-run funds have beaten more than 90 percent of rivals, according to Bloomberg data.
"They have a top-notch global industry research staff and those insights are shared throughout the firm," said Dan Newhall, a principal at Vanguard.
Philadelphia accountant Walter L. Morgan founded the Wellington Fund -- the oldest U.S. mutual fund that balances stocks and bonds to reduce risk -- in 1928, a year before the stock market crash. He guided it through the Great Depression and beyond.
In 1951 Morgan hired Bogle, 86, who eventually rose to run Wellington Management until a merger and internal strife led to his ouster. The next year in 1975 Bogle started Vanguard, which would build its name with index funds while Wellington managed some of its active pools.
Years later Bogle praised the traditions of a balanced portfolio and the fair treatment of clients established by Morgan and adopted by Vanguard. Upon Morgan’s death in 1998, Bogle called him "my mentor."
Today, Boston-based Wellington runs about $300 billion for Vanguard in 21 funds, many of them as a co-manager with other firms. Wellington manages a total of $927 billion for endowments, central banks, sovereign wealth and mutual funds in a range of assets classes and styles.
No House View
Clients describe Wellington as a series of boutiques with a centralized research staff. Each group has broad discretion on how it manages money. There is no house view, no chief investment officer.