Vanguard Shuffles Its "Closed to New Investors" Lineup
Reported by Neil Anderson, Managing Editor
Two Vanguard [profile] mutual funds just reopened to new investors while a third mostly closed.
Today the Valley Forge, Pennsylvania-based mutual fund giant revealed that the three-star, bronze-rated, $16.2-billion, Wellington-run Vanguard High-Yield Corporate Fund and the four-star, silver-rated, $33.8-billion Vanguard Intermediate-Term Tax-Exempt Fund both reopened to new investors. Meanwhile, the four-star, gold-rated, $11.5-billion, PRIMECAP-run Vanguard Capital Opportunity Fund has closed to most new investors.
Company Press Release
VANGUARD REOPENS TWO BOND FUNDS, ?LIMITS GROWTH IN CAPITAL OPPORTUNITY FUND ?
?Adds second advisor to Long-Term Investment-Grade Fund
VALLEY FORGE, PA. (December 9, 2013)—Vanguard has reopened Vanguard High-Yield Corporate Fund and Vanguard Intermediate-Term Tax-Exempt Fund to all investors, effective immediately.
The $16.1 billion High-Yield Corporate Fund, which is managed by Wellington Management Company LLP, was closed in May 2012. The $33.7 billion Intermediate-Term Tax-Exempt Fund, a municipal bond fund that is managed by Vanguard Fixed Income Group, was closed in February 2013. In both cases, Vanguard acted pre-emptively to address concerns that continued asset growth in the funds could harm the interests of current shareholders.
“These funds were closed to reduce cash flow, with the aim of preserving the advisors’ ability to implement their investment strategies and produce competitive long-term returns,” Vanguard CEO Bill McNabb said. “Cash flow to the funds has subsided which, along with a change in market conditions, has enabled us to reopen the funds.”
Capital Opportunity Fund Closed
Vanguard has closed Vanguard Capital Opportunity Fund to most new accounts, effective immediately.* The fund is managed by PRIMECAP Management Company.
The $11.4 billion Capital Opportunity Fund was closed in 2004. It reopened to select investors in 2007, and to all retail investors in April 2013. Since its wider reopening this year, the fund’s assets have grown by more than $2 billion.
“While the size of the fund is currently manageable, continued strong cash inflows and growth resulting from market appreciation could pose challenges for PRIMECAP Management in the future. We feel closing the fund is the appropriate step at this time,” Mr. McNabb said.
(See attachment for the performance of Vanguard Capital Opportunity Fund and other funds mentioned in this release.)
Vanguard has a long history of closing funds and restricting cash inflows to maintain fund assets at reasonable levels. Currently, six Vanguard funds are closed to most new accounts in order to manage asset size: Admiral™ Treasury Money Market Fund, Federal Money Market Fund, Convertible Securities Fund, Capital Opportunity Fund, PRIMECAP Core Fund, and PRIMECAP Fund. An additional five funds are closed pending fund mergers.
Manager added to long-term bond fund
The board of trustees of Vanguard Long-Term Investment-Grade Fund has approved the addition of Vanguard Fixed Income Group to the fund’s advisory team. Wellington Management Company has managed the $13.4 billion fund since its inception in 1973 and will continue to serve as the lead advisor.
“After careful consideration, the fund’s board determined that our Fixed Income Group’s investment philosophy and capabilities will complement the fund’s existing advisor,” Mr. McNabb said. “It is also expected to benefit the fund’s investors by adding a high-quality manager to the fund’s overall portfolio and investment strategy without changing its fundamental character.”
Vanguard Fixed Income Group is one of the largest fixed income managers in the world, managing nearly $745 billion invested in 70 taxable and tax-exempt bond, taxable and tax-exempt money market, and stable value funds. The Group oversees about $420 billion in actively managed funds and about $325 billion in bond index and exchange-traded funds.
Wellington Management oversees about $400 billion in fixed income assets, including nearly $105 billion for Vanguard. In addition to the Long-Term Investment-Grade and High-Yield Corporate funds, Wellington provides investment advisory services to the $27.9 billion Vanguard GNMA Fund.
This marks the first time that Vanguard has employed the multi-advisor approach on a fixed income fund. Vanguard has long used multiple managers on its actively managed equity funds. Vanguard Windsor II became the first Vanguard fund to adopt this approach in 1987. Today, 17 of its actively managed U.S.-domiciled equity funds currently employ the approach. Vanguard believes that a fund with multiple managers can benefit from the diversity of thought and investment ideas.
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 more than $2.4 trillion in U.S. mutual fund assets, including more than $300 billion in ETF assets. The firm offers more than 160 funds to U.S. investors and more than 100 additional funds in non-U.S. markets. For more information, visit vanguard.com.
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*New accounts may be established by clients of Vanguard Flagship Services and Vanguard Asset Management Services with a $25,000 annual purchase limit for most clients except that participants in certain qualified retirement plans may continue to invest in accordance with the terms of their plans. Certain qualifying asset allocation programs may also continue to operate in accordance with the programs’ terms.
All asset figures are as of November 30, 2013, unless otherwise noted. ?
?For more information on Vanguard funds, visit vanguard.com or call 800-662-7447 to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
Mutual funds are subject to risks, including possible loss of principal. Investments in bond funds are subject to interest rate, credit, and inflation risk. Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund's trading or through your own redemption of shares. For some investors, a portion of the fund's income may be subject to state and local taxes, as well as to the federal Alternative Minimum Tax. Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks. High-yield bonds generally have medium- and lower-range credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings.