Vanguard Funds: Gun Investments And Your Money

Vanguard, one of the world's largest asset managers, has faced scrutiny for its investments in gun manufacturers. The Vanguard Total Stock Market ETF, for instance, includes stocks of American Outdoor Brands (formerly Smith & Wesson) and Sturm, Ruger & Co. While gun stocks comprise a small fraction of the fund, less than 1% of the portfolio, it has raised concerns among investors who wish to align their investments with their values. Vanguard's funds, such as the Vanguard 500 Index Fund and Vanguard Total Stock Market Index Fund, have received a D grade for their investments in military weapons and civilian firearm manufacturers, respectively. These funds are invested in companies like Northrop Grumman Corp, a leading gun manufacturer and retailer. Investors seeking to avoid supporting the gun industry can utilise tools provided by Vanguard and other organisations to screen funds for specific holdings and make informed investment decisions.

Vanguard Total Stock Market ETF (VTI)

The Vanguard Total Stock Market ETF (VTI) is an exchange-traded fund that offers investors exposure to the US stock market. As of 31 July 2024, the fund is invested in military contractors above 2.5% and below 4% and has received a grade of D for its investments in military weapons.

VTI is also invested in civilian firearm manufacturers and retailers, with investments in companies such as Northrop Grumman Corp, Dick's Sporting Goods Inc., and Academy Sports and Outdoors Inc. Ordinary Shares. The fund's exposure to civilian firearms manufacturers is above the threshold of 0.1% and below 0.4%, resulting in a gun grade of D. As of 31 August 2024, VTI had $12.45 billion invested in gun manufacturer and major gun retailer stocks, representing 0.74% of the fund's total investments.

In addition to its investments in the firearms industry, VTI also has investments in coal, oil, and natural gas energy and utility companies, deforestation-risk agricultural commodities, and the prison industry, including private prison operators. The fund is also exposed to military arms manufacturers and services companies, including nuclear weapon manufacturers and servicers.

It is important to note that VTI is a passively managed fund, meaning that its investments in gun manufacturers are a result of the fund tracking certain indexes of the US economy, rather than active decision-making by a fund manager.

Vanguard 500 Index Admiral (VFIAX)

The Vanguard 500 Index Admiral (VFIAX) is an open-end mutual fund that seeks to replicate the performance of the S&P 500 by investing in the stocks that comprise the index with the same approximate weightings. With total net assets of $464.448 billion, it has a net expense ratio of 0.04% and a 52-week average return of 28.81%.

The fund has a D grade for investments in military weapons, with 2.5% to 4% of its portfolio invested in military contractors, including Honeywell International Inc. and Lockheed Martin Corp. It also has exposure to civilian firearm manufacturers and retailers, although the exact percentage is not disclosed.

In addition to weapons investments, the fund has investments in coal, oil, and natural gas companies, as well as deforestation-risk agricultural commodities, and prison operators. It also invests in companies involved in gender equality initiatives, according to Equileap company data.

The Vanguard 500 Index Admiral (VFIAX) is a widely recognised fund with a strong performance record. However, investors should be aware of its exposure to the weapons industry and other controversial investments.

Vanguard 500 Index Fund (VOO)

The Vanguard 500 Index Fund (VOO) is an open-ended mutual fund that offers exposure to the performance of the broad US stock market. While the fund's specific investments in gun manufacturers are not publicly available, we can examine similar Vanguard funds and their investments in the gun industry to get an idea.

The Vanguard Total Stock Market ETF (VTI) is invested in civilian firearm manufacturers and retailers, with holdings in companies like Northrop Grumman Corp, Dick's Sporting Goods Inc., and Academy Sports and Outdoors Inc. This fund has a Gun Grade of D, indicating investments above 0.1% and below 0.4% of its total assets. Similarly, the Vanguard 500 Index Admiral (VFIAX) fund earns a D grade for its investments in military weapons, with holdings in military contractors such as Honeywell International Inc. and Lockheed Martin Corp.

It's important to note that the Vanguard 500 Index Fund (VOO) may have indirect exposure to the firearms industry through its broad market approach. The fund aims to replicate the performance of the S&P 500 index, which includes companies from various sectors of the US economy. While the fund's specific holdings are not disclosed, it likely holds a diverse range of stocks, including some that operate in the firearms industry.

For investors who wish to align their investments with their values, it is possible to find gun-free funds that exclude investments in firearm manufacturers and retailers. These funds are designed for individuals who want to ensure their money is not supporting the gun industry. Additionally, investors can consider funds that focus on environmental and social issues, such as those graded by As You Sow's Invest Your Values report card, which evaluates funds on their investments in areas like climate change, gender equality, and weapon investments.

In summary, while the exact holdings of the Vanguard 500 Index Fund (VOO) are not publicly available, similar Vanguard funds have investments in the gun industry, and the broad market approach of the VOO fund may include indirect exposure to the firearms sector. Investors concerned about gun investments can explore dedicated gun-free funds or consider funds graded on their environmental and social impact.

Vanguard's D grade for military weapons

The Vanguard Total Stock Market ETF has also come under scrutiny for its investments in gun stocks, specifically American Outdoor Brands (formerly Smith & Wesson) and Sturm, Ruger & Co. While these investments tend to comprise a small fraction of the entire fund (less than 1%), they have sparked discussions about the role of passive funds in supporting the gun industry.

The D grade assigned to Vanguard's funds by organisations like Weapon Free Funds and Gun Free Funds highlights the need for investors to consider the social and environmental impact of their investments. These grades provide valuable insights for investors who want to make informed decisions about where their money is going and how it aligns with their values.

Vanguard's ESG funds

Vanguard offers ESG (environmental, social, and governance) funds that allow investors to put their money in funds that consider ESG issues. Vanguard's ESG funds are designed to complement an investor's portfolio and reflect their personal preferences. The company offers a mix of indexed and actively managed ESG funds.

The indexed funds, which follow an exclusionary strategy, omit companies that do not meet certain ESG criteria. Vanguard's four indexed ESG funds are:

• ESGV ESG U.S. Stock ETF (approx. 1,500 stocks)
• VFTAX FTSE Social Index Fund (approx. 500 stocks)
• VSGX ESG International Stock ETF (approx. 3,000-4,000 stocks)
• VCEB ESG U.S. Corporate Bond ETF (approx. 200-300 bonds)

The actively managed funds, on the other hand, invest in companies with leading or improving ESG practices. Vanguard's three actively managed ESG funds are:

• VBPIX Baillie Gifford Global Positive Impact Stock Fund (approx. 25-50 stocks)
• VEOIX Global Environmental Opportunities Stock Fund (approx. 25 stocks)
• VEIGX Global ESG Select Stock Fund (approx. 40-50 stocks)

While Vanguard offers ESG funds, some of its other funds are invested in gun manufacturers and retailers, including civilian firearm manufacturers and military weapons contractors. For example, the Vanguard Total Stock Market ETF has been identified as having investments in civilian firearm manufacturers, with 0.74% ($12.45 billion) of its portfolio invested in gun manufacturer and retailer stocks. Similarly, the Vanguard 500 Index Admiral (VFIAX) has been graded 'D' for its investments in military weapons, with investments in military contractors above 2.5%.

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