The Vanguard Group of Malvern, Pa., will liquidate two of its funds and eliminate a one percent redemption fee on two other funds, the company announced today.
Beginning today, Vanguards Strategic Equity Fund and Global Equity Fund will no longer carry a one percent redemption fee on shares redeemed within five years of their purchase, Vanguard announced. The fees were established to discourage short-term trading and market timing, but that has not been a problem in either fund, according to Vanguard.
Vanguard will liquidate its Preferred Stock Fund and its Global Asset Allocation Fund because of the funds inability to attract a sufficient level of assets, Vanguard said.
The Global Asset Allocation Fund was introduced in 1995 and invests in stocks, bonds and cash reserves of markets in developed countries. The fund had trouble attracting assets because its investment objective was too broad, said John J. Brennan, CEO and chairman of Vanguard. The funds ability to shift its assets across the worlds securities markets has made it difficult for many investors to understand its risk/reward characteristics and determine its proper role in their portfolios, said Brennan, in a statement.
The fund has attracted only $106 million in assets in its five years of operation, the company said.
The Preferred Stock Fund is being liquidated because its investment strategy is no longer effective, Vanguard said. The fund, which is designed for corporate investors, is managed to provide significant dividend income, a large portion of which is tax free to corporate investors under the federal intercorporate dividends-received deduction. However, the dividends-received deductions rate has dropped from a maximum of 100 percent to 70 percent, which has reduced the funds appeal, Vanguard said.
Currently the fund has $189 million in total assets.