Vanguard U.S. Growth Fund merger complete
February 21, 2014
The merger of the $771 million Vanguard Growth Equity Fund into the $4.7 billion Vanguard U.S. Growth Fund, announced in October 2013, is now complete. The action is one of a number of recent Vanguard efforts to simplify and lower the cost of investing for our clients.
Why merge the funds?
The two funds shared many common traits. They were both actively managed, large-capitalization growth funds with identical investment objectives to provide long-term capital appreciation to investors. Both funds also had a multimanager structure and used a fundamental stock-selection process emphasizing U.S. company stocks with strong earnings potential. They also benchmarked their returns to the same index, the Russell 1000 Growth Index, which measures the performance of the large-capitalization growth segment of the U.S. equity market.
How will the fund be managed?
The Vanguard U.S. Growth Fund's investment objective and strategy stayed the same and it retained its advisors—Delaware Investments Fund Advisers, Wellington Management Company, LLP, and William Blair & Company L.L.C. It added Baillie Gifford Overseas Ltd. and Jennison Associates LLC, the two advisors who previously managed Vanguard Growth Equity Fund, to its team.
What are the benefits for investors?
Particularly if you previously held shares in Vanguard Growth Equity Fund, you'll save on investing costs. The fund retained Vanguard U.S. Growth Fund's expense ratios of 0.45% for Investor Shares and 0.31% for Admiral Shares™. These expense ratios are both lower than Vanguard Growth Equity Fund's expense ratio of 0.52%; that fund also didn't have ultra low-cost Admiral Shares, which reduce investing costs even more.
For U.S. Growth Fund investors, the addition of Baillie Gifford and Jennison Associates to the advisory team adds diversity of thought and approach to the fund's investment approach. The addition expands the multimanager structure Vanguard U.S. Growth Fund has used for a decade and which we’ve applied to 17 of our actively managed funds since 1987. We find that combining high-caliber investment management teams that have distinct but complementary strategies can help reduce portfolio volatility, provide the potential for outperformance over the long term, and mitigate manager risk.
The merger also takes some of the confusion out of the fund-selection process. With two very similar funds to consider, you may have had more difficulty deciding which one to include in your investment portfolio.
A pattern of mergers designed to simplify and lower the cost of investing
This recent merger is one of several announced in October that aimed to streamline Vanguard's investment options to simplify investors' choices and reduce costs. That announcement also included plans to:
- Reorganize three Vanguard Managed Payout Fund portfolios into a single fund, called Vanguard Managed Payout Fund, completed on January 17, 2014.
- Merge Vanguard Developed Markets Index Fund into Vanguard Tax Managed International Fund, expected to be completed in April. The merged fund's name will be Vanguard Developed Markets Index Fund.
- Merge Vanguard Tax-Managed Growth and Income Fund into Vanguard 500 Index Fund, expected to be finalized in May.
In each of the mergers, the funds involved have similar objectives and strategies. Investors aren't expected to recognize any capital gains or losses as a result of the changes.
- All investing is subject to risk, including the possible loss of the money you invest.
- Diversification does not ensure a profit or protect against a loss.
- All asset figures are as of January 31, 2014, unless otherwise noted.
- For more information on Vanguard funds, visit Funds, Stocks & ETFs or call 800-662-7447 to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.