Vanguard consolidates five mutual funds

Fund giant will also eliminate minimum on some offerings

Oct 20, 2013 @ 12:01 am

By Jeff Benjamin

The Vanguard Group Inc. said last Wednesday that it plans to consolidate five of its mutual funds and has increased individual-investor access to its lower-cost Admiral Shares by eliminating Signal Shares.

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 seek to track the same benchmark, the FTSE Developed ex-North America Index, Vanguard said.

The combined fund is keeping the name Vanguard Developed Markets Index Fund.

Two funds tracking the S&P 500 will also be merged. The $3 billion Vanguard Tax-Managed Growth and Income Fund will be merged with the $143 billion Vanguard 500 Index Fund. Shareholders of the tax-managed fund will benefit from the lower expense ratio of 0.05% for the Admiral Shares of the 500 index fund.

The $738 million Vanguard Growth Equity Fund will merge with the $4.4 billion Vanguard U.S. Growth Fund. Both funds are actively managed large-cap-growth funds, and shareholders of the growth equity fund will experience a reduction in annual cost following the merger from 0.54% down to 0.45% for Investor Shares and 0.31% for Admiral Shares.

The $804 million Vanguard Managed Payout Distribution Focus Fund and the $110 million Vanguard Managed Payout Growth Focus Fund are being consolidated into the $531 million Vanguard Managed Payout Growth and Distribution Fund, which will be renamed the Vanguard Managed Payout Fund.


Regarding the increased access to Admiral Shares, Vanguard said that it is “gradually phasing out Signal Shares.”

Along those lines, Vanguard has changed the name of eight of its index funds from Signal Shares to Admiral Shares, a move that allows individual investors with a $10,000 minimum investment to qualify for the lower-cost shares.

Also beginning last Wednesday, Vanguard eliminated the $10,000 minimum investment required for financial advisers and institutions to qualify for Admiral Shares of 14 index funds, and the $100,000 minimum required for Admiral Shares of 10 sector index funds.

Vanguard is also eliminating the $10,000 minimum for advisers and institutions to qualify for the 17 Admiral Shares index funds that currently offer Signal Shares. Vanguard will convert these Signal Shares to Admiral Shares next October.

There is $100 billion in total assets held in Signal Shares.


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