Vanguard to offer global minimum volatility fund
September 27, 2013
Vanguard today filed a registration statement with the U.S. Securities and Exchange Commission for Vanguard® Global Minimum Volatility Fund, expected to be available in the fourth quarter of 2013.
"The new fund features the hallmarks of a Vanguard offering—low costs, broad diversification, and a disciplined approach," said Vanguard Chairman and CEO Bill McNabb. "The fund is designed to provide long-term investors exposure to the broad global equity market with less expected volatility."
The new actively managed equity fund, which Vanguard Equity Investment Group will manage, will seek to provide investors with long-term capital appreciation (where the investment made in the fund's securities increases in value over time), while having less volatility than that of the overall global equity market.
Global diversity and currency hedging
Global asset diversification will aid the fund's managers in their efforts to contain volatility. About half the fund's assets will be invested in stocks of U.S. companies, and the other half invested in foreign companies.
The fund will use forward currency contracts to hedge a significant portion of the fund's holdings in foreign currency. With forward currency contracts, two parties agree to exchange currencies at a set time, for a set price. The combination of different contracts helps cancel out the effect the fluctuating U.S. dollar may have on the value of the fund's foreign stock holdings. This practice can help mitigate currency risk, which is the effects of currency distortions between the value of U.S. and non-U.S. currencies, so that a fund's investment returns more closely match the performance of the investments in their local currencies. These distortions can affect volatility for the fund overall.
Share classes and purchase information
Expert investment management
Vanguard Equity Investment Group (EIG) will manage the new fund. EIG currently oversees more than $13 billion in assets in traditional active quantitative equity strategies, including hedged global equity assets.
James Troyer, James Stetler, and Michael Roach will manage the fund. All are investment management veterans. Mr. Troyer has more than 30 years of investment management experience, while Mr. Stetler has more than 15 years, and Mr. Roach has more than a decade of experience.
EIG manages indexed and structured equity portfolios covering U.S. and international markets. It has developed sophisticated portfolio construction methodologies and efficient trading strategies that seek to deliver returns that are highly correlated with target portfolio benchmarks.
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- Investments in stocks issued by non-U.S. companies are subject to risks including country/regional risk, which is the chance that political upheaval, financial troubles, or natural disasters will adversely affect the value of securities issues by companies in foreign countries or regions; and currency risk, which is the chance that the value of a foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in currency exchange rates.
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- All asset figures are as of August 31, 2013, unless otherwise noted.
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