Basketball really fascinates me. I love the fact that it provides a huge canvas to show off athleticism. I love the precision of shooting from long-range or finishing with some elaborate spin at the rim. The strategy of spacing and off-ball movement is really a work of art, when done well.
While many of the great moments of basketball come from the offensive end, when a team rises up to play elite defense something exciting happens in a game. Watching a player take a charge, or sprint back to stop a fast break, or fly into the paint to grab a rebound is electrifying.
Vanguard Wellesley has that kind of powerful defense. Wellesley has been around since 1970, and has a relative (Wellington Fund) that has been around since before the Great Depression. Wellington Fund is closed to new investors, so I decided to look at its more conservative cousin Wellesley.
Wellesley has a great parent, of course. It seems most everyone has heard of Vanguard, and for good reason. Vanguard has some of the best active and passive mutual funds as well as a host of extremely low-cost ETF's. We know that Wellesley has the institutional support to be the kind of fund that will be there in 50-100 years.
Wellesley is managed by a team, so it isn't subject to the risk of a star manager leaving. Some of the managers have been there since 2007/2008, others are fairly new. Wellington Management Company was founded in 1928, so as an institution they have seen a few economic events.
The Wellesley portfolio is about 40% stocks and 60% bonds, a very efficient exposure to stocks. The majority of the equity in the portfolio is in large cap value stocks, companies that are trading at a lower price relative to earnings. There is a modest weighting in foreign stocks.
The bond portion of the portfolio is all high-quality debt with some exposure to short-term, intermediate-term, and long-term bonds.
Over the last 20 years, the portfolio took $10,000 and compounded it into about $40,000, with only two calendar years of losses, 1999 and 2008. The economic crisis had the greatest drawdown, a loss of almost 19% from the peak in 2007 to the low point in February of 2009.
Wellesley is not comprehensive enough to be your whole portfolio, since it lacks meaningful exposure to small caps and emerging markets, but it could be a very effective tool for exposure to large cap value stocks and investment grade bonds.
Before you buy shares of Wellesley, learn the facts about the fund and measure your risk capacity and preference.