The mergers will affect two index funds—an actively managed growth fund and two retirement income funds. The following is a breakdown of the proposed changes, which are expected to take place over the next several months:
- Vanguard plans to merge the $16.3 billion Vanguard Developed Markets Index Fund with the $18.4 billion Vanguard Tax-Managed International Fund. The funds share similar holdings and seek to track the same benchmark—the FTSE Developed ex North America Index. The merged fund will be named Vanguard Developed Markets Index Fund.
- Two funds that track the Standard & Poor’s 500 Index will also merge. The $3 billion Vanguard Tax-Managed Growth and Income Fund will merge with the $143 billion Vanguard 500 Index Fund.
- A merger of the $738 million Vanguard Growth Equity Fund and the $4.4 billion Vanguard U.S. Growth Fund is also planned. The two actively managed large-capitalization growth funds seek to provide long-term capital appreciation and employ a fundamental stock-selection process that emphasizes stocks with strong earnings potential.
- The three portfolios of the Vanguard Managed Payout Fund series will also be consolidated into a single fund. Two funds—the $804 million Vanguard Managed Payout Distribution Focus Fund and the $110 million Vanguard Managed Payout Growth Focus Fund—will merge into the $531 million Vanguard Managed Payout Growth and Distribution Fund, which will be renamed Vanguard Managed Payout Fund.
The five funds slated for merger have already been made unavailable to new investors. Existing shareholders, though, are permitted to make additional investments in these funds prior to the mergers.
More on the fund mergers is available here.
In a separate announcement, Vanguard suggested it will work to make the low-cost “Admiral Shares” of its index funds available to more individual, adviser and institutional clients. The firm also plans to streamline its share class offerings by gradually phasing out its Signal Shares classification.
Here is a brief rundown of the changes to Admiral Shares, which Vanguard introduced to provide shareholders lower fund expense ratios:
- For eight of its index funds, Vanguard changed the name of Signal Shares to Admiral Shares, a move that enabled retail clients with a minimum investment of $10,000 to qualify for the lower-cost shares.
- Vanguard also eliminated Admiral Share minimum investment levels for 24 funds, marking the first time these funds will be available to advisers and institutions without a minimum.
Additional information on the changes to Admiral Share availability can be found here.