This isn't an area of strength of mine - so I may be wrong.
You are, of course, right in saying that the majority of Vanguard’s assets are in index-tracking funds and ETFs. These funds do not make discretionary investment choices. Instead: -They replicate the composition of a specific market index (e.g., ASX200, NBI). -Vanguard is obliged to hold the stocks in that index, in the same weights as the index. - Investment decisions are therefore rules-based, not based on analyst conviction.
Mesoblast is part of a few indices that Vanguard are likely obliged to hold stock in, such as the ASX200 and the Nasdaq Biotechnology Index. However, both the ASX200 and the NBI weight their holdings based on the market caps of the companies in them. The greater the market cap, the greater the weighting in the index.
There is no way that Mesoblast makes up enough of those indices to explain Vanguard holding 5% of the company. A portion of the 5% yes, but not all of it.
I think that the buying pattern outlined in the announcement is indicative that Mesoblast has been taken into the actively managed funds that Vanguard has. In these funds, portfolio managers make investment decisions based on due diligence and perceived investment merit.The managers are not tied to an index and can be discretionary as to what they exclude and include.
Therefore, I believe that Vanguard has decided to up their holding in Mesoblast based on merit, which is why they have almost exclusively bought since the 20th of March and added over 2 million shares to their holding. This does not line up with any index balancing behaviour.
I think this is actually pretty great to be honest, long may they accumulate.
Cheers, Gang gang
MSB Price at posting:
$1.80 Sentiment: Buy Disclosure: Held
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