Vanguard's Australian operations are gaining steam, and like their U.S. counterparts, the Australian Vanguard team members are big proponents of index investing. But in the rush to develop investors' "indexing quotients" or, as Vanguard likes to put it, their IQs, the company's Plain Talk Library confuses rather than educates. In one online "test," my favorite question reads: "True or false. An index must hold all of the securities in a particular index."

You and I know the answer is "true." Of course an index must hold all the securities in an index. Duh! But because Vanguard meant to ask if an index fund must hold all the securities, the true answer is "false."

I'm assuming this is just some of that down-under humor, mate.

As I've often told subscribers to The Independent Adviser for Vanguard Investors, the ETF business is booming, and Vanguard has taken every opportunity to grab its piece of the pie since it launched its first ETFs, then called "VIPERS," in 2001. Thanks to its success in the ETF business, it is once again the "nation's top-selling fund company," as Investment News put it:

Propelled by sales of its exchange traded funds, The Vanguard Group Inc. regained its status as the nation's top-selling fund company last year, edging past rival American Funds, which had been No. 1 since 2002.

Investors poured a net $76.2 billion into Malvern, Pa.-based Vanguard's stock, bond and ex-change traded funds last year, compared with $74.7 billion for American Funds, according to Boston's Financial Research Corp.

While there may not be much there for investors like you and me to be excited about, one thing is clear, and it's something I've told my subscribers for years: Vanguard is hands-down the best place to find low-cost mutual funds and ETFs. In fact, it's those low costs that often make the difference between outperformance and underperformance.

The news is out: Earl McEvoy, manager of the bond portion of Vanguard Wellesley Income Fund (VWINX) and lead manager of Vanguard High-Yield Corporate Fund (VWEHX) and Vanguard Long-Term Investment-Grade Fund (VWESX), will be retiring on June 30, 2008. You can read the full press release at businesswire.com.

Of course, this is no surprise to subscribers to The Independent Adviser for Vanguard Investors, as I notified them of the upcoming change in the latest FFSA Independent Guide to the Vanguard Funds.

Under McEvoy's leadership, High-Yield Corporate has been in a class by itself. While its higher-quality bias relative to other junk bond ("high yield") funds has caused it to lag at times, it holds up better in down markets, and the fund's methodology kept it from investing in any issues collateralized by subprime borrowers. But it's not a no-risk fund, and you'll pay a 1% back-end load that Vanguard calls a "redemption fee" if you sell shares held less than one year. McEvoy will be replaced by Michael L. Hong of Wellington Management on this fund.

As for Wellesley Income, it's been an exceptional offering for risk-averse income-oriented investors, though of course it can't compete when stocks are charging ahead of bonds. I don't expect many changes to result from McEvoy's retirement. His replacement, John Keogh, is a solid value stock manager with Wellington Management's full backing.

While McEvoy's departure is no cause for celebration, given his long and reliable tenure, I'm confident in Wellington Management's deep pool of talent, and expect to see little if any noticeable effect on the three funds' performance once the transition is complete.

Even so, it's important to know just who's running your fund, and that's why I keep a close eye on manager changes, as well as what managers are investing in their own funds, or as I like to say "eating their own cooking," and how much. And that's not to mention where the Vanguard directors are investing—for all Vanguard's talk about indexing, you might be surprised where their money actually goes. Of course, finding out is easy for subscribers to my newsletter. I do all the heavy lifting and report on manager and director holdings for all Vanguard funds each year. For the record, McEvoy had over $1 million of his own money invested in Wellesley as of Sept. 30, 2007, but held no shares of High-Yield Corporate or Long-Term Investment Grade.

February is often manager-musical-chairs month at Vanguard, and since I wrote about Earl McEvoy's retirement, Vanguard has announced more manager changes. Subscribers to my newsletter can read my full analysis on these management changes in the news section of my website, but here's an overview.

First, Vanguard ousted Grantham, Mayo, Van Otterloo, which manages some $150 billion in assets and is the home of noted perma-bear Jeremy Grantham. The quantitative group had originally been brought into Vanguard to run a piece of Explorer in the spring of 2000 (but wasn't handed a piece of the Small Company Growth Annuity until the fall), then were the founding managers of U.S. Value when it debuted in June 2000. Vanguard's own quantitative equity team will replace GMO.

The GMO firing raises, once again, the question of whether Vanguard's disclosures are adequate or accurate. In U.S. Value's September 2007 annual report, published in November, just three months ago, Vanguard's Board says that retaining GMO is "in the best interests of the fund and its shareholders." Could they have changed their tune so quickly as to turn around and fire GMO just a few months later?

Vanguard also announced that International Growth is adding a third manager—M&G Investment Management, which has run Precious Metals & Mining since its inception. The question we have to ask here is, will the addition of another management team turn it into an index-hugging foreign fund?

As I've always said, when it comes to mutual funds, you're not just buying a fund, you're hiring the manager. That's why monitoring changes in fund management and knowing the long-term track record of managers is one of my top priorities, and should be yours, too.