MutualFundWire.com: Vanguard Adds to Tax-Managed Offerings
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Wednesday, August 18, 1999

Vanguard Adds to Tax-Managed Offerings


OK, so a few disgruntled Bogle fans have threatened to take their money and run if Vanguard's board makes no exception and forces Jack Bogle into retirement at the end of the year. Anyone thinking that low cost fund fans will flee the house that Jack built en masse is kidding themselves.

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  • The Vanguard Group
    • The issue has certainly not been handled with great aplomb -- public relations director Brian Mattes helped matters not at all by breaking Vanguard's traditional stoic media front, posting on the "Vanguard Diehards" section of Morningstar.com that investors have Jack Brennan to thank for Vanguard's success the last three years. Yes and no. A foundation needs to be built for a house to be lived in, the last time I looked. But regardless, this will all blow over and Vanguard will sail on, retaining (almost) all of its devoted investors.

    Vanguard continues to go about its business amidst the Bogle controversy, launching its fifth tax-managed fund, the Vanguard Tax-Managed International Fund, now constituting what it calls "the broadest line-up of tax-efficient portfolios in the mutual fund industry," which now has gathered $4 billion in assets among the existing funds.

    The new fund will track the Morgan Stanley Capital International Europe, Australasia, Far East (EAFE) Index, an unmanaged benchmark of some 1,000 stocks in 20 developed foreign countries. "International funds have been relatively tax-inefficient vehicles, losing some 20% of their returns to taxes over the past five years," said George Sauter, managing director, Vanguard. "Our objective with the new Fund is to offer broad exposure to the European and Pacific equity markets while maximizing after-tax total returns."

    The expected expense ratio is 0.35%, typical Vanguard low cost compared to an average expense ratio for international funds of 1.66%, according to Lipper. The minimum initial investment is $10,000, and shares are offered without sales commissions or 12b-1 plan fees. An institutional class of shares for investors with $10 million or more will be offered at 0.25%. The fund will also assess redemption fees of 2% on shares sold within one year of purchase and 1% on shares held for more than one year but less than five years.


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