Vanguard is changing the investment process for its four LifeStrategy series from a mix of active and passive management to an all-index approach.
Vanguard said it is adjusting the approach to make all of its lifecycle funds consistent, as the other lifecycle funds are also all-index.
The four funds will invest in three other broad-market component funds that Vanguard runs, the Vanguard Total Stock Market Index, Vanguard Total International Stock Index and Vanguard Total Bond Market II Index funds. The actively managed components that are being removed are investments in the Vanguard Asset Allocation and Vanguard Short-Term Investment-Grade funds.
“An all-index approach has several benefits, including lower costs and a simplified portfolio design,” said Vanguard CEO Bill McNabb.
Once the transition to the lower-cost index funds is completed, the expense ratios of the funds will decline two to four basis points to a range of 14 to 18 BPS. Introduced in 1994, the LifeStrategy Funds have aggregate assets of $25 billion.
