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Could this Be the Vanguard GNMA Winning Edge?

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Update: 7.1.2020: From Wellington: “Effective at the close of business on June 30, 2020, Michael F. Garrett has retired from Wellington Management Company LLP and no longer serves as a portfolio manager for Vanguard GNMA Fund. Brian Conroy and Joseph F. Marvan remain as the portfolio managers of the Fund.”

Originally posted June 7, 2017.

Do you know Michael F. Garrett? There’s no reason that you should, but to me, the Senior Managing Director at Wellington Management Company LLP in Boston, Massachusetts might be one of the most important names in the fixed-income world today. He’s the portfolio manager of the Vanguard GNMA Fund, which is managed by Wellington.

I knew about Mr. Garrett heading into a recent call with a senior team at The Vanguard Group—a presentation where one thing in particular made me sit-up in my chair and take note. It relates to a risk I believe to be paramount at this particular time. It’s a risk we’ve really never seen before in the history of the market.

The Many Risks of Fixed Income Investing

To be sure, there are several risks associated with any investment today in fixed-income. A stark reality if you’ve ever studied a prospectus. Reading about the risks covered in a prospectus may leave you with the feeling of never wanting to leave your house again. The risks are spelled out for you, even with Vanguard GNMA. For example, yes, the credit risk is covered by the government, but you’re on the hook for: Prepayment risk, income risk, extension risk, interest rate risk, manager risk and a somewhat new risk, I’ll refer to as Fed risk. The risk of not knowing what the Federal Reserve will do with all those bonds in its portfolio.

Which brings me to Vanguard GNMA’s portfolio manager Michael Garrett. In our private conversation with The Vanguard Group, we hit upon the above risks like rapid fire bullets hitting a steel plate from 25 yards. Ting, ting, ting! Extension risk was repeatedly hit, but that’s not what got my attention.

Michael Garret Has Seen How the Sausage is Made

What made me sit-up was Vanguard GNMA portfolio manager Michael Garrett’s resume. It’s a sterling history of work. He’s worked in investment management since 1991, but there was a gap in his employment with Wellington where he worked for the government. Guess who was teaching the Fed about the intricacies of buying government bonds? Guess who was actually buying the bonds for the government? That would be Vanguard GNMA portfolio manager and Wellington Senior Managing Director, Michael Garrett. He’s seen how the sausage is made because he was in the kitchen—a winning edge for you, which feels like a secret to me, as a long-term, successful investor in Vanguard GNMA.

Learn more about Vanguard GNMA and Michael Garrett here.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.