Vanguard consolidates five funds

The fund giant plans to consolidate five funds and eliminate $10K minimum for advisers on some funds

Oct 16, 2013 @ 8:39 am

By Jeff Benjamin

The Vanguard Group Inc. announced 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 company explained that the funds share similar holdings and seek to track the same benchmark, the FTSE Developed ex-North America Index.

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

Two funds tracking the S&P 500 Index 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% of the Admiral Shares of the 500 Index fund.

The $738 million Vanguard Growth Equity Fund will also be merged 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 Vanguard Managed Payout Fund.

Regarding the increased access to Admiral Shares, Vanguard announced 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 enables individual investors with a $10,000 minimum investments to qualify for the lower-cost shares.

Also beginning Wednesday, Vanguard is eliminating 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 10 sector index funds.

Vanguard is also eliminating the $10,000 minimum for financial advisers and institutions to qualify for Admiral Shares 17 index funds that currently offer Signal Shares. Vanguard will convert these Signal Shares to Admiral Shares in October 2014.

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