In addition, the industry's largest indexing shop took several steps to broaden its fund lineup, made a couple of management changes, and moved to increase its appeal to well-heeled investors. Among large funds, Vanguard Windsor II staged one of the industry's biggest turnarounds. In 1999, manager Jim Barrow's avoidance of tech and affinity for beaten-down issues took a big toll on returns. Both funds also produced strong gains in 1999, but unlike a lot of that year's strongest performers, these offerings weren't chock-full of speculative Internet stocks. Vanguard's bond funds have continued to put up solid numbers, as they do year after year.
Solid management helps, but in the bond-fund universe, the most important factor is cost.
Vanguard's funds are much cheaper than competitors' offerings, so they should remain good bets in the future. Growth Equity and U.S. Value were the first two actively managed funds launched by Vanguard since 1996. At the same time, Vanguard temporarily closed actively managed Capital Opportunity, which was besieged with inflows after posting a dazzling 1999 return. Vanguard's portfolio-review group, run by Jeff Molitor, was busy in 2000. Molitor's team vets new managers and monitors existing ones, and it recommended changes at a couple of Vanguard's actively managed offerings.