Vanguard's Mid Cap Growth Filter Fails to Deliver on Its Investor Promise

"VOT tracks growth-oriented mid-cap US equities, focusing on companies with market values between roughly $2 billion and $10 billion that show above-average earnings or revenue growth expectations. The fund holds over 150 positions with Technology and Industrials each representing 19.6% of the portfolio. This isn't a bet on a single sector winning-it's a diversified collection of mid-sized companies positioned to expand market share, scale operations, or benefit from secular trends that could drive returns beyond what established large-caps deliver."

"The portfolio's largest positions reflect the fund's growth thesis in action. Constellation Energy (NASDAQ:CEG) leads at 3.06%, capitalizing on the energy transition, while Robinhood (NASDAQ:HOOD | HOOD Price Prediction) at 2.95% and DoorDash (NYSE:DASH) at 2.24% round out the top three-both companies disrupting traditional industries with digital-first business models. This concentration in disruptors rather than established players defines VOT's approach."

"VOT's five-year track record reveals a concerning pattern, with the fund returning 26.75% over that period. This means investors accepted growth-focused concentration risk without the premium returns typically expected from this strategy, raising questions about whether the growth filter consistently identifies winners in the mid-cap space."

VOT targets growth-oriented U.S. mid-cap companies with market values roughly between $2 billion and $10 billion and selects firms showing above-average earnings or revenue growth expectations. The fund holds over 150 positions and emphasizes Technology and Industrials, each comprising 19.6% of the portfolio. Top holdings include Constellation Energy (3.06%), Robinhood (2.95%), and DoorDash (2.24%), reflecting a tilt toward disruptive, digital-first firms. The strategy aims to capture companies positioned to expand market share or benefit from secular trends. The five-year return was 26.75% and the recent one-year gain was 0.59%, indicating weaker-than-expected performance for a growth sleeve.

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