Mutual fund giant
Vanguard anticipates the fund to appeal to institutional investors, mainly foundations and endowments. Investor shares of the fund will require a minimum first investment of $250,000 and institutional shares will require a minimum of $5 million investment.
“It’s really new for them,” said Dan Culloton, an analyst at
Shareholders of the fund are expected to be mailed a proxy statement detailing the proposed reorganization in early October, and a shareholder meeting is set for Mid-November. If approved, the tax-free reorganization should be completed by year-end.
The new fund would seek performance higher than the returns of three-month U.S. Treasury bills. Each advisor will individually buy securities deemed undervalued and sell short an approximately equal dollar amount of securities deemed overvalued.
“I guess they’re just trying to round out their offerings a bit,” said Daniel Wiener, editor of the Independent Adviser for Vanguard Investors newsletter. “One of the big benefits for the funds is going to be that the they’re going to cut the expense ration,” he said.
The existing fund charges an expense ration of 1.54% on its investor shares and 1.24% on its institutional share classes. The new fund will have an estimated expense ration of .75%, while institutional shares will carry an estimated ratio of .60%, according to Vanguard.
“Anytime Vanguard enters a category, they automatically introduce some fierce price competition. The fees are going to be pretty low here relative to the category, as you would expect,” said Culloton.
“I would assume that they’ve given this process a few dry runs and are confident that they can do it competently,” he said. “The proof will be in the pudding, of course, but the Vanguard quantitative equity group has a pretty good record with the other quant funds it runs,” Culloton said.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.