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Monday, April 21, 2008

Vanguard Retirement Income Funds Start Subscription Period

News summary by MFWire's editors

Vanguard has launched its Managed Payout Funds. Expense ratios range between 57 and 58 bps. The subscription period kicked off Monday and and will run through May 4.


Company Press Release

VALLEY FORGE, Pa. - (Business Wire) The Vanguard® Managed Payout Funds*, innovative, low-cost mutual fund offerings for retiring and retired investors, are now accepting investments. A subscription period for the funds began today and is expected to conclude on May 4, 2008.

“For more than 30 years, we’ve helped our clients accumulate wealth for retirement. Now, as an increasing number of our shareholders are facing decisions about how to manage their assets in retirement, we’re pleased to offer the Vanguard Managed Payout Funds as a low-cost, diversified investment option,” said Vanguard Chairman and CEO John J. Brennan.

Research shows that retirees consider preserving their principal and maintaining adequate savings for their needs later in life important in managing their retirement nest egg. Retirees also place importance on having a dependable source of income and maintaining access to their assets for unforeseen expenditures, such as health care costs. The Vanguard Managed Payout Funds were developed to address these concerns. Each fund is designed to function much like an endowment by investing over the long-term to preserve or build capital while generating monthly payments. The three funds offer distinct, dual objectives for investors with varying income needs and principal growth goals:

* Vanguard Managed Payout Growth Focus Fund (VPGFX) seeks to make monthly distributions of cash while providing inflation protection and capital appreciation over the long term.

* Vanguard Managed Payout Growth and Distribution Fund (VPGDX) seeks to make monthly distributions of cash while providing inflation protection and capital preservation over the long term. * Vanguard Managed Payout Distribution Focus Fund (VPDFX) seeks to make monthly distributions of cash while providing capital preservation over the long term.

Traditional annuity products generally charge investors considerable fees or penalties for account principal withdrawals. Vanguard Managed Payout Funds offer investors access to their assets at any time. The funds also help investors to retain greater control of their assets for estate planning purposes.

The Vanguard Managed Payout Funds are structured as funds-of-funds. They may invest in low-cost Vanguard domestic and international stock index funds, bond and REIT index funds, and inflation-protected securities and money market instruments. The Managed Payout Funds may also allocate a portion of their assets to commodity-linked and market neutral investments that are expected to add diversification and result in a more consistent return pattern than a traditional balanced portfolio of stocks, bonds, and cash. Investors should note that the funds are not guaranteed to achieve their investment objectives, are subject to loss, and their distributions may be treated in part as a return of capital.

The minimum initial investment requirement is $25,000. The funds have no sales commission, and their annual expense ratios are expected to range between 0.57% and 0.58%, which is less than one-half the average expense ratio of all mutual funds, according to Lipper Inc.

To educate investors interested in the Managed Payout Funds, two new tools are now available on Vanguard.com:

* A payout calculator to help estimate initial monthly payouts based on a specific investment amount, or to estimate the investment amount needed to generate a specific initial monthly payout amount.

* A “Which fund is right for me?” tool to help investors choose the Managed Payout Fund most appropriate for their needs and risk tolerance.

Vanguard believes that the funds will be particularly attractive to participants in employer-sponsored retirement plans who are seeking to roll over retirement assets into a diversified portfolio. In addition to the new Managed Payout Funds, Vanguard offers retired investors a range of products and services, including retirement planning, an immediate annuity, and traditional target-date, life-cycle, and balanced mutual funds.

During the subscription period that begins today, the Managed Payout Funds will invest in money market instruments to accumulate sufficient assets to construct representative, diversified portfolios. This approach is expected to reduce initial transaction costs. The funds are expected to implement their long-term investment strategies on May 5, following the conclusion of the subscription period.

Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages nearly $1.25 trillion in U.S. mutual fund assets, including more than $350 billion in employer-sponsored retirement plans. Vanguard offers more than 150 funds to U.S. investors and more than 40 additional funds in foreign markets.

All asset figures are as of March 31, 2008.

For more information, visit www.vanguard.com, or call 800-662-7447 to obtain a fund prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

The Managed Payout Funds are not guaranteed to achieve their investment objectives and some of their distributions may be treated in part as a return of capital. The dollar amount of a fund’s monthly cash distributions could go up or down substantially from one year to the next and over time. It is also possible for a fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its distributions to shareholders under its managed distribution policy. An investment in a fund could lose money over short, intermediate, or even long periods of time because each fund allocates its assets worldwide across different asset classes and investments with specific risk and return characteristics. Diversification does not necessarily ensure a profit or protect against a loss in a declining market. The funds are proportionately subject to the risks associated with their underlying funds, which may invest in stocks (including stocks issued by REITs), bonds, cash, inflation-linked investments, commodity-linked investments, long/short market neutral investments, and leveraged absolute return investments.

Vanguard and the ship logo are trademarks of The Vanguard Group, Inc. All other marks are the exclusive property of their respective owners.
 

Edited by: Erin Kello


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