- The Vanguard Wellington Fund, formed before the Great Depression, is still thriving.
- Its portfolio managers shared how they’ve crushed the competition in recent years.
- Here’s how the team picks stocks — and while they’re still big believers in bonds.
Having a healthy respect for history doesn’t necessarily mean living in the past. Nor does it mean driving a car by only looking through the rearview mirror.
Managers of the Vanguard Wellington Fund (VWELX), one of the world’s oldest mutual funds, know the difference. That helps them do their jobs in reverence, but not deference.
Loren Moran and Daniel Pozen are, metaphorically, standing on the shoulders of giants. They’re entrusted with running the third-oldest active mutual fund; its inception was on July 1, 1929. It’s one of the only investment products created before the Great Depression that’s still standing.
But the Vanguard Wellington Fund — named for the second-largest asset manager on Earth and Boston-based trillion-dollar firm Wellington — is far from a relic. The fund, which has over $113 billion in assets, ranks in the top 8% of its category in the last 15 years, per Morningstar. And it’s only finished in the bottom half of its peer group once in the last decade.
Business Insider recently spoke with Moran and Pozen about their investing strategy, and how they’re guiding the Vanguard Wellington Fund as it approaches its 100th birthday.
The portfolio managers explained that their fund’s impressive track record is just one of its hard-to-match advantages. Others include its history, reputation and brand, resources, access to management teams, size — which lets it offer a comically low expense ratio of 0.25% — and, of course, a long-term focus.
“We’re not worried about outperforming this quarter or next quarter,” said Pozen, who’s been with the fund for six years. “We’re concerned, or focused, on delivering great performance over the long term. So I think it allows us to make better decisions — more patient decisions.”
How to stand out while fitting in
The Vanguard Wellington Fund has three main goals, explained Pozen, who runs the stock part of the portfolio: outperform the S&P 500 over time, offer a dividend yield that’s equal or greater to the market, and provide downside protection in difficult market and economic environments.
Smart stock selection is at the heart of this mission. Companies that create economic value for shareholders, both through earnings and dividends, should be rewarded by investors over time, Pozen said. Conversely, firms at risk of getting disrupted or becoming obsolete are unwise bets.
“Our focus is on identifying companies that can deliver value creation at an attractive rate in absolute and higher than the market over the long term — and in a way that’s reasonably predictable and understandable, such that we don’t end up buying high and selling low,” Pozen said.
That last point is crucial. Pozen isn’t trying to time the market, as he picks stocks with a four- to five-year time horizon in mind, but valuations are top of mind. Having a bottom-up approach means there isn’t a line in the sand based on a certain valuation metric that disqualifies a stock from consideration, though it’s prudent to see where it is relative to the market and its peers.
Investors don’t always seem to care about valuations, as evidenced by how the market rallied while hovering around a historically high earnings multiple. But when there’s market turbulence, like there’s been lately, the “price” part of the price-to-earnings ratio comes back into focus.
This careful vetting of companies’ valuations has helped Pozen and Moran’s fund hold up during down years, like 2015, 2018, and 2022. And although the fund has struggled in a choppy 2025, the portfolio managers have plenty of time to extend their outperformance streak to five years.
Another secret of this fund’s consistent performance is that its holdings are benchmark-relative, meaning that its fate is tied, at least in part, to the S&P 500. Its five largest holdings are all members of the vaunted Magnificent Seven, and only Tesla didn’t crack the top 10.
Ironically, this doesn’t necessarily mean that Pozen is excited about mega-cap growth stocks.
“I wouldn’t confuse their large absolute weight, necessarily, with our positive or negative conviction in the stock,” Pozen said.
This unconventional approach helps the fund stay near the S&P 500. If its holdings had little in common with the index, it could be tough to stay within striking distance. It’s the prioritization of the other 60 or so stocks that determines whether the fund meets its mandate of outperformance.
Why the 60/40 portfolio isn’t dead
As vital as stock selection is, equities only make up about two-thirds of this mutual fund.
The other 35% of invested assets are in fixed income, which is Moran’s domain. That smaller share doesn’t mean it’s an afterthought. On the contrary, this part of the portfolio is crucial to diversification, income generation, and differentiation, which can lead to outperformance.
“We have a history that shows that it generally does provide that downside protection, and then the benefit of the shareholder being able to experience the positive long-term return dynamics of equities in a lower volatility context,” Moran, who’s been on the fund since early 2017, said of fixed income.
Within fixed income, Moran also follows bond benchmarks and keeps a mix of US Treasuries and investment-grade coupons across durations. The typical bond has a 4.9% yield to maturity and a duration of just under seven years, but there are short- and medium-term coupons too.
Many investors have moved away from fixed income, which has woefully underperformed stocks for much of the 17 years since the so-called Great Financial Crisis. That includes a brutal 2022, which was one of the worst years ever for the 60-40 stock-bond portfolio.
“It’s really been a particularly robust market environment since the GFC, with just a couple of short interruptions,” Pozen said. “That’s a long period of time, and so it would be easy to forget about all of the history that precedes that.”
Although bonds haven’t been in style for a while, Vanguard strategists noted that 60-40 funds have quietly posted robust returns since the start of 2023. Over time, Moran believes the lack of correlation between fixed income and equities greatly helps diversification and performance.
“We’ve seen that actually be a really fruitful approach for investors, but that’s not true over every moment in time,” Moran said of a balanced fund. “What Dan and I focus on is delivering a consistent return for shareholders that enables them to go through these market cycles.”
In the last 96 years, the Vanguard Wellington Fund has experienced more booms and busts than just about any investor not named Warren Buffett can fathom. By sticking to a time-tested strategy, the fund seems set for another century of success.
