Vanguard Group plans to simplify its Target Retirement Funds and certain other funds-of-funds in an effort to improve the products’ international diversification.

The Valley Forge, Pa., company plans to replace the funds three underlying international portfolios with a single broad international stock index fund. Vanguard will also increase the overall international equity exposure of these funds.

Assets in the funds’ current international component funds – the Vanguard European Stock Index Fund,the  Vanguard Pacific Stock Index Fund and the Vanguard Emerging Markets Stock Index Fund - will be moved to the Vanguard Total International Stock Index Fund.

The transition is expected to occur in the next few months in the 12 Vanguard Target Retirement Funds and three Vanguard Managed Payout Funds.
Gus Sauter, Vanguard’s chief investment officer, said by making these changes investors will have “more streamlined portfolio construction and more diversified international exposure.”

Under the simplified approach, most of the Target Retirement Funds will comprise three broad index funds. Target Retirement Funds with target dates greater than five years from the current year will offer allocations constructed using only three funds.

Vanguard also plans to increase the international equity exposure of Vanguard Target Retirement Funds, Vanguard LifeStrategy Funds, and Vanguard STAR Fund from approximately 20% to approximately 30% of the equity allocations. The exposure to domestic equities in these funds will be reduced so that the overall allocation of stocks and bonds remains the same.

"This increased international allocation will incrementally increase diversification and hence, marginally reduce the volatility of the funds over the long term," Sauter said.

Vanguard, Which had $1.4 trillion in mutual fund assets under management as of Aug. 31, offers more than 165 index and actively managed funds and ETFs to U.S. investors and more than 50 additional funds in non-U.S. markets.


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