Upcoming fund changes to lower costs, simplify investing
October 16, 2013
To help make investing simpler and give you even more low-cost options, Vanguard plans to merge several funds and to add lower-cost Admiral™ Shares to a few existing funds.
"For nearly four decades, Vanguard has been dedicated to lowering the cost of investing for our clients and simplifying investing with us," said Vanguard CEO Bill McNabb. "These actions are just the latest of these efforts."
More funds adding low-cost Admiral Shares
Admiral Shares will be added to the $20 billion Vanguard Dividend Appreciation Index Fund. The new Shares will feature an estimated expense ratio of 0.10% and are expected to be available for purchase in December.
In addition, Vanguard Global ex-U.S. Real Estate Index Fund has changed the name of its Signal Share class to Admiral Shares. The fund’s Admiral Shares are available for purchase by retail investors today. The name change is expected to have no impact on the expense ratio, which was 0.32% as of the end of the last fiscal year.
Mr. McNabb noted the success Admiral Shares have had in lowering investing costs. The share class is popular with Vanguard clients, with Admiral Shares holding nearly $700 billion—about one-third of Vanguard's nearly $2.2 trillion in U.S. fund assets under management.
Purchase and redemption fees to be reduced for Vanguard FTSE All World ex-US Small-Cap Index Fund
Purchase and redemption fees protect a fund's long-term shareholders because they're assessed to the investors performing these actions. They cover the costs of buying or selling securities, including brokerage commissions and market impact costs, and they're separate from a fund's expense ratio.
Effective today, we're halving the transaction fees on Vanguard FTSE All World ex-US Small-Cap Index Fund. Purchase and redemption fees, previously 0.50%, are now 0.25%.
Several funds merging to simplify choices and administration
Continuing efforts to simplify and streamline our funds and overall fund lineup, we're merging a handful of funds that have similar objectives and strategies. The funds are not expected to recognize any gains or losses as a result of the mergers.
The funds' board of trustees, Vanguard's Portfolio Review Group, and a dedicated team of investment experts regularly review and evaluate all of Vanguard's funds. "This (evaluation) is an ongoing, active exercise," said John Ameriks, who heads Vanguard's Active Equity Group. "These recent steps are another page out of the same book."
Following are details on the merging funds. The mergers are expected to occur over the next several months.
- The $16.3 billion Vanguard Developed Markets Index Fund will be merged with the $18.4 billion Vanguard Tax-Managed International Fund. The funds share similar holdings and use the same benchmark—the FTSE Developed ex North America Index. The merged fund—to be named Vanguard Developed Markets Index Fund—will be available in Investor, Admiral, Institutional, Institutional Plus, and ETF Shares.
- The $3 billion Vanguard Tax-Managed Growth and Income Fund will be merged with the $143 billion Vanguard 500 Index Fund. Both funds use the Standard & Poor's 500 Index. Shareholders of the Tax-Managed Growth and Income Fund will benefit from the lower expense ratio of the 500 Index Fund's Admiral Shares, which is 0.05%.
- The $738 million Vanguard Growth Equity Fund will merge with the $4.4 billion Vanguard U.S. Growth Fund. Both actively managed large-capitalization growth funds seek to provide long-term capital appreciation, employ a fundamental stock-selection process that emphasizes stocks with strong earnings potential, and have a multi-manager structure. The merged fund will keep Vanguard U.S. Growth Fund's current advisors—Delaware Investments Fund Advisers, Wellington Management Company, LLP, and William Blair & Company L.L.C.—and add Vanguard Growth Equity Fund's advisors, Baillie Gifford Overseas Ltd. and Jennison Associates LLC, after the merger closes. The merged fund will retain Vanguard U.S. Growth Fund's expense ratios: 0.45% for Investor Shares and 0.31% for Admiral Shares. If you own shares in Vanguard Growth Equity Fund, your expense ratio will go down from 0.54%.
- The Vanguard Managed Payout Funds will consolidate from three separate funds into one all-in-one choice. Two funds—the $804 million Vanguard Managed Payout Distribution Focus Fund and the $110 million Vanguard Managed Payout Growth Focus Fund—will merge into the $531 million Vanguard Managed Payout Growth and Distribution Fund. The merged fund, which will have approximately $1.4 billion in assets, will be called Vanguard Managed Payout Fund. (For more on the Managed Payout Fund mergers, read A simpler managed payout solution for retirement income.)
Effective October 16, 2013, new investors will no longer be able to invest in the five merged funds—Developed Markets Index, Tax-Managed Growth and Income, Growth Equity, Distribution Focus, and Growth Focus. Existing shareholders will still be able to make additional investments in these funds before the mergers take place.
Through our regular evaluation process, we'll continue to look for these types of opportunities. As Mr. Ameriks said, "The world changes, as do our funds. Our board, executive committee, and investment professionals adjust as necessary and when appropriate."
While some fund structures may adapt to circumstances in the markets and the investing world, Vanguard stays committed to this core purpose: To take a stand for all investors, to treat them fairly, and to give them the best chance for investing success.
- All investing is subject to risk, including the possible loss of the money you invest.
- Bond funds are subject to interest rate risk, which is the chance bond prices overall will decline because of rising interest rates, and credit risk, which is the chance a bond issuer will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline.
- Diversification does not ensure a profit or protect against a loss.
- All asset figures are as of September 30, 2013, unless otherwise noted.
- The Managed Payout Funds are not guaranteed to achieve their investment objectives, are subject to loss, and some of their distributions may be treated in part as a return of capital. The dollar amount of a fund's monthly cash distributions could go up or down substantially from one year to the next and over time. It is also possible for a fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its distributions to shareholders under its managed distribution policy. An investment in a fund could lose money over short, intermediate, or even long periods of time because each fund allocates its assets worldwide across different asset classes and investments with specific risk and return characteristics. Diversification does not necessarily ensure a profit or protect against a loss in a declining market. The funds are proportionately subject to the risks associated with their underlying funds, which may invest in stocks (including stocks issued by REITs), bonds, cash, inflation-linked investments, commodity-linked investments, long/short market neutral investments, and leveraged absolute return investments.
- Registration statements relating to Admiral Shares of Vanguard Dividend Appreciation Index Fund and Investor Shares and Institutional Plus Shares of Vanguard Tax-Managed International Fund have been filed with the Securities and Exchange Commission but have not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
- 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. Copies of the final prospectus can be obtained from Vanguard. Please note that a preliminary prospectus is subject to change.
- Vanguard ETF Shares are not redeemable with the issuing Fund other than in Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
- U.S. Pat. No. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; 8,180,695; 8,185,464.