With little fanfare, Vanguard bid adieu to Asset Allocation (MUTF:VAAPX) on Friday, Feb. 10, the fund’s last trading day. Assets have now been moved into Balanced Index (MUTF:VBINX) and fund No. 78 (the Admiral shares were No. 578) is now history. And it was some history. Shifting between S&P 500 stocks, long-term Treasuries and cash, the managers at Mellon Capital kept Asset Allocation on a pretty level playing field with Vanguard balanced-fund stalwart Wellington (MUTF:VWELX) for years.
But something must have gotten into the computers because not only did Asset Allocation stumble in bear markets, but since the 2008 market decline, the fund just never got back on its feet.
Click to Enlarge From inception through Friday, Asset Allocation earned a 12.3% annualized return through some of the most bullish, and most bearish markets most of today’s investors have ever seen. But, by contrast, Wellington earned a 13.8% return, 1.5% better per annum over the entire period — a result that simply adds up over time. To put it into dollar terms, for every $100 that Asset Allocation turned into $691, Wellington was able to turn into $864 — a 25% difference. Vanguard simply went with the better horse.
Wellington, by the way, also has outperformed Balanced Index since that fund’s inception in 1992; up an annualized 13.3% to 11.2% for the index fund. Over that same period Asset Allocation earned just 10.9%. Shareholders are better off in Balanced Index, but they’d be even happier in Wellington.