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Vanguard Lowers Fund Expenses for one Fund and Reopens Another

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The $40 billion Vanguard Total International Stock Index Fund will now cost investors less than before. Four popular fund classes now boast expense ratios that range from 12 to 20 basis points. Always a favorite fund company for registered investment advisors, Vanguard also eliminated minimum investment requirements for 25 of its Signal class funds last week.

Vanguard Total International Stock Index Fund is based on the MSCI All Country World ex USA Investable Market Index, which, Vanguard stated in its announcement Monday, “covers 98% of the world’s non-U.S. markets, including the European, Pacific, and emerging market regions, as well as Canada.” The fund provides small-, mid-, and large-cap exposure to 6,000 companies in 44 countries.

Vanguard Total International Stock Index Fund will be available in 2011 as an ETF with an expense ratio of 20 basis points, which, Vanguard notes, citing Morningstar, “is expected to be the lowest expense ratio for an ETF based on the MSCI ACWI ex USA IMI Index.”

The institutional shares, VTSNX, with a $5 million minimum, carry a 15 basis point expense ratio (ER), while the institutional plus shares (VTPSX), at a minimum investment of $100 million, have a 12 basis point ER. Vanguard’s Admiral and Signal shares of the fund will each have ERs of 20 basis points, with lower investment minimums.

Capital Value Fund Reopens 

After closing in Oct. 2009 following a strong rally and large inflows of cash, the $693 million Vanguard Capital Value Fund (VCVLX), reopened to new investors Monday.

“Closing the fund has been effective in tempering investor interest and stemming cash inflows,” said Vanguard CEO Bill McNabb (left) in a statement, adding, “Capital Value is an aggressive fund with the flexibility to pursue opportunities in a broad investment universe. As such, it should be considered a complementary, not a core, holding.” McNabb also cautioned in the Vanguard announcement Monday that, “the reopening should not represent a ‘buy signal’ to prospective investors.”

Wellington Management Company, LLP, has been a sub-advisor to the fund since 2001. Since 2008, Wellington Management Senior Vice President and Partner, Peter I. Higgins, has been a portfolio manager. Since December 2009, Wellington Management Vice President David W. Palmer, has also been a portfolio manager. Each manages about half of the fund, which Vanguard states “provides a blend of distinct investment approaches designed to enhance diversification and dampen volatility.”

The actively managed fund has a $3,000 investment minimum and carries an ER of 45 basis points.

Vanguard has $1.5 trillion in mutual fund assets under management. 


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