Vanguard targeting advisers, institutions with new funds

Vanguard targeting advisers, institutions with new funds
Vanguard said Thursday it will expand its index investment offerings with 19 new mutual funds, each with an exchange-traded fund version holding the same stocks or bonds as the companion mutual fund.
AUG 18, 2010
Vanguard said Thursday it will expand its index investment offerings with 19 new mutual funds, each with an exchange-traded fund version holding the same stocks or bonds as the companion mutual fund. The nation's largest fund company also is launching an ETF version of its S&P 500 Index fund, which Vanguard introduced in 1976 and now holds $91 billion. Vanguard filed applications with regulators to offer the funds, and hopes to have them on the market by the fall, said Melissa Nassar, a principal in Vanguard's financial adviser services group. While the ETFs will be accessible to individual investors, the new mutual funds are geared toward institutional clients and financial advisers, since they require minimum investments of $5 million. Each of the funds and companion ETFs will invest in segments of the stock and bond markets not already covered by Vanguard's existing lineup of more than 160 mutual funds and 46 ETFs — for example, the S&P 500 value index or the Russell 2000 growth index. Sixteen of the new funds will invest in stocks. Three of the new offerings are bond funds, focused on municipal bonds with short-, intermediate and long-term maturities. Index funds are mutual funds that track market segments by investing in all of the components of the index. They typically charge investors lower expenses than actively managed funds run by managers who pick stocks or bonds. Historically, research has shown that most active managers have failed to beat the returns of cheaper index funds, once costs are figured in. Vanguard pioneered index investing in the 1970s, and now manages nearly $1.4 trillion in fund assets, with another $102 billion in ETFs, more than double the figure a year ago. ETFs are baskets of stocks, bonds or commodities that can be traded like stocks during daily trading sessions. Mutual funds are only priced once a day. The new ETF version of Vanguard's S&P 500 fund is offered at a lower expense ratio of 0.06 percent than the 0.18 percent cost of the index version geared toward average individual investors.

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