Investment Portfolio Managers
Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.
Investment Portfolio Managers
Practitioners typically go into investment-decision making roles after several years working as an analyst. If you like generating investment ideas, developing and implementing investment strategy, can manage risk, and can remain resilient and decisive when faced with potential underperformance and poorly performing financial markets, this role could be right for you.
Throughout the investment industry, regardless of the industry sector or the type of firm, investment decision-makers are the ones who determine what funds and assets to buy and sell and when. Their approach to building portfolios and resource allocation will usually depend on their firm, their clients, and the financial goals the portfolio is trying to achieve. Managers typically start their careers in financial analyst roles. Other types of decision-making roles include:
SUMMARY: The Securities and Exchange Commission is adopting amendments to its forms under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940 to improve the disclosure provided by registered management investment companies regarding their portfolio managers. The amendments extend the existing requirement that a registered management investment company provide basic information in its prospectus regarding its portfolio managers to include the members of management teams. The amendments also require a registered management investment company to disclose additional information about its portfolio managers, including other accounts that they manage, compensation structure, and ownership of securities in the investment company.
SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission ("Commission") is adopting amendments to Form N-1A,1 Form N-2,2 and Form N-3,3 registration forms used by management investment companies to register under the Investment Company Act of 1940 ("Investment Company Act") and to offer their securities under the Securities Act of 1933 ("Securities Act"); amendments to Form N-CSR4 under the Investment Company Act and the Securities Exchange Act of 1934 ("Exchange Act"), the form used by registered management investment companies to file certified shareholder reports with the Commission; and an amendment to Rule 30a-25 under the Investment Company Act.6
Registered management investment companies ("funds")7 typically are externally managed by an investment adviser, to which they pay an advisory fee from fund assets. The investment adviser in turn employs and compensates the individuals who act as portfolio managers for the fund. Our rules require funds to disclose in their prospectuses certain information concerning their portfolio managers. Fund prospectuses are required to include the name, title, length of service, and business experience of the individuals who are primarily responsible for the day-to-day management of the fund.8 If a committee, team, or other group is jointly and primarily responsible for management of the fund, the fund must provide disclosure to the effect that the fund's investments are managed by that group, but need not provide the names of the members of the group.9
In order to address these concerns, earlier this year the Commission proposed rules intended to provide greater transparency regarding portfolio managers, their incentives in managing a fund, and potential conflicts of interest ("Proposing Release"). These proposals were designed to assist investors in evaluating fund management and making investment decisions.
The Commission is adopting, with modifications to address commenters' concerns, proposed amendments to Forms N-1A and N-2, the registration forms for mutual funds and closed-end funds, that will require those funds to identify in their prospectuses each member of a committee, team, or other group of persons associated with the fund or its investment adviser that is jointly and primarily responsible for the day-to-day management of the fund's portfolio.13 The amendments we are adopting will require funds to state the name, title, length of service, and business experience of each member of a portfolio management team.
We are also adopting amendments to Form N-3, the registration form for insurance company managed separate accounts that issue variable annuity contracts, to require disclosure regarding portfolio managers, including members of portfolio management teams, similar to the disclosure that will be required by Forms N-1A and N-2.14 Currently, Form N-3 does not require disclosure about portfolio managers.
Commenters generally supported the Commission's proposal to require improved disclosure about members of portfolio management teams. However, several commenters expressed concern that, while a requirement to identify the members of a portfolio management team may be appropriate for teams that consist of a relatively small number of members, the disclosure could become lengthy and less meaningful in the case of larger teams. Some of these commenters noted that some portfolio management teams consist of both portfolio managers, who have authority to make management decisions, and analysts and other junior members, who have no decision-making authority. These commenters argued that the proposed disclosure requirement could be interpreted to require disclosure of every such junior member of a management team, which would result in lengthy disclosure that would have to be updated frequently, whenever the composition of the team changed. In addition, some commenters argued that a requirement to identify all members of a portfolio management team could inhibit an adviser's ability to change the composition of a team.
We note that, under the amendments we are adopting, disclosure is only required with respect to members of a management team who are jointly and primarily responsible for the day-to-day management of the fund's portfolio. To the extent that a fund is managed by a committee, team, or other group that includes additional members who are not jointly and primarily responsible for day-to-day management, identification of these individuals is not required. Thus, if a fund has a management team that includes analysts who make securities recommendations with respect to the portfolio, but do not have decision-making authority, these individuals would not have to be identified, unless they are jointly and primarily responsible for day-to-day management of the fund's portfolio. An analyst could be jointly and primarily responsible for day-to-day management if, for example, the individual who has decision-making authority over the fund's portfolio routinely adopts the analyst's recommendations.
We are, however, modifying our proposal in response to the commenters' concerns to provide that if more than five persons are jointly and primarily responsible for the day-to-day management of a fund's portfolio, the fund need only provide the required information for the five persons with the most significant responsibility.15 This will permit funds with large numbers of persons that are jointly and primarily responsible for portfolio management to provide information about the key decision-makers rather than lengthy disclosure about numerous individuals that would obscure other important information in the prospectus.
The determination of the members of a portfolio management team who are jointly and primarily responsible for the day-to-day management of a fund's portfolio will depend on the facts and circumstances of the particular fund. For example, in the case of a fund with a large management team, where a single "lead member" is responsible for implementing and monitoring the overall portfolio management of the fund, it may be appropriate to identify this single "lead member" as the portfolio manager. Some funds with large management teams are "research-driven" funds that may have portfolio management teams with as many as 50 members, each of whom is allocated a specified portion of the portfolio over which he or she has independent responsibility for research, stock selection, and portfolio construction. A research-driven fund may have a coordinator with responsibility for allocating the portfolio among the various managers and analysts, implementing trades on behalf of analysts on the team, reviewing the overall composition of the portfolio to ensure its compliance with its stated investment objectives and strategies, and monitoring cash flows. In such a case, it may be appropriate for a fund to identify the coordinator as its portfolio manager. If a research-driven fund does not have such a portfolio coordinator or similar position, it may be appropriate to provide the required information for the five persons with the most significant responsibility for the day-to-day management of the fund's portfolio, for example, the managers with the largest percentages of assets under management.
The amendments also require a fund to provide a brief description of each member's role on the management team (e.g., lead member).16 We are modifying the proposal to clarify that a fund's description of a member's role on a committee, team, or group must include a description of any limitations on the person's role and the relationship between the person's role and the roles of other persons who have responsibility for the day-to-day management of the fund's portfolio.17 This responds to commenters' suggestions that we require additional disclosure regarding the structure of each management team. The amended requirement is intended to provide investors with a clearer understanding of what an identified portfolio manager does and does not do in the course of day-to-day management of the fund, and the ways in which the responsibilities of any identified portfolio manager relate to those of other members of a portfolio management team, including members who may not be identified in the prospectus as portfolio managers. It will also assist investors in funds with large management teams, such as research-driven funds, in understanding how the responsibilities of an identified portfolio manager may differ from those of a manager who manages a fund on his or her own or with a small team of other managers. For example, if a portfolio management team for a balanced fund has one team member who is responsible only for the overall allocation of the fund's assets among equities, bonds, and money market instruments, and other team members who are responsible only for selection of securities within a particular segment of the fund, the fund's disclosure should describe these limitations in describing each member's role. 041b061a72