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Wednesday, May 23, 2012

McNabb Cuts More Fees

by: Erin Kello

Vanguard [profile] is cutting out the contingent redemption fees on 19 equity index funds and 14 actively managed funds, effective immediately. The change was made when the company determined that these fees, one of several measures in place to discourage frequent trading, were no longer needed.

The Malvern, Pennsylvania-based mutual fund fleet is also reducing purchase and redemption fees on another fund. The fees charged for the Vanguard FTSE All-World ex-US Small-Cap Index Fund have been reduced to 50bps from 75bps.

Company Press Release

Vanguard is eliminating contingent redemption fees on 19 equity index funds and 14 actively managed funds, effective immediately. See accompanying table for details.

After careful analysis of investor transaction activity and net cash flow, Vanguard determined that these fees, one of several measures in place to discourage frequent trading, are no longer needed. The other measures include prohibiting an investor’s purchases or exchanges into a fund account for 60 calendar days after the investor has redeemed or exchanged out of that fund account. Vanguard funds also retain the right to reject any purchase request (including exchanges from other Vanguard funds) if such a purchase may negatively affect a fund’s operation or performance.

Two Vanguard funds (FTSE All-World ex-US Small-Cap Index and Global ex-US Real Estate Index) will continue to assess non-contingent transaction fees on share redemptions.

Vanguard reducing transaction fees charged by FTSE All-World ex-US Small-Cap Index Fund

Vanguard is reducing the purchase and redemption fees charged by Vanguard FTSE All-World ex-US Small-Cap Index Fund from 0.75% to 0.50%. These transaction fees help cover the higher trading costs associated with foreign and illiquid markets. Without such fees, the fund's existing long-term shareholders would bear those trading costs. As its net assets and transaction activity have increased, the fund has been able to offset share purchases with redemptions, resulting in lower portfolio trading costs. Purchase and redemption fees do not apply to ETF Shares of Vanguard funds.  

About Vanguard

Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies. Vanguard manages nearly $1.84 trillion in U.S. mutual fund assets. Vanguard offers more than 170 funds to U.S. investors and more than 70 additional funds in non-U.S. markets. For more information, please visit www.vanguard.com.

Assets as of April 30, 2012.

Mutual funds and ETFs are subject to risks, including possible loss of principal. Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks. Foreign investing involves additional risks including currency fluctuations and political uncertainty. Stocks of companies in emerging markets are generally more risky than stocks of companies in developed countries. Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility. Investments in bond funds are subject to interest rate, credit, and inflation risk. Because high-yield bonds are considered speculative, investors should be prepared to assume a substantially greater level of credit risk than with other types of bonds. For more information about Vanguard funds, visit www.vanguard.com or call 877-662-7447 to obtain a 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.

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