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Portfolio > Mutual Funds

Vanguard Cuts Fees on 7 Funds: Portfolio Products

By Jeff Berman

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Vanguard lowered expense ratios on three international income-oriented funds and four externally managed equity funds.

The three international income-oriented funds affected are the $1.6 billion Vanguard International Dividend Appreciation Index Fund, including an Admiral Shares fund and an exchange-traded fund, whose expense ratios were lowered from 0.25% to 0.20%; the $1.5 billion Vanguard International High Dividend Yield Index Fund, including an Admiral Shares fund and an ETF, whose expense ratios were lowered from 0.32% to 0.27%; and the $1.9 billion Vanguard Emerging Markets Government Bond Index Fund.

The latter includes an ETF and an Admiral Shares fund, whose expense ratios were lowered from 0.30% to 0.25%, and an Institutional Shares fund, whose expense ratio was lowered from 0.29% to 0.23%.

Also lowered were expense ratios on the Vanguard Selected Value Fund Investor (from 0.36% to 0.33%); Vanguard Windsor Fund Admiral (0.21% to 0.20%) and Vanguard Windsor Fund Investor (0.31% to 0.30%); Vanguard Emerging Markets Select Stock Fund Investor (0.94% to 0.93%); and Vanguard Explorer Fund Investor (0.46% to 0.45%).

Separately, Vanguard said it made changes to the multi-manager structures of three value funds: the $47.5 billion Vanguard Windsor II Fund, $8 billion Vanguard Selected Value Fund and $951.5 million Diversified Value Portfolio of Vanguard Variable Insurance Fund.

Two new advisory firms joined Vanguard’s lineup of 24 external investment advisors, bringing “experience and talent that Vanguard believes will result in stronger long-term performance for the funds and better outcomes for clients moving forward,” the firm said.

Aristotle Capital Management was added to Windsor II Fund, joining existing advisors Lazard Asset Management, Hotchkis and Wiley Capital Management and Sanders Capital. Cooke & Bieler was added to Selected Value Fund, joining existing advisors Donald Smith & Co. and Pzena Investment Management. Lazard Asset Management and Hotchkis and Wiley Capital Management, two of the current managers of Windsor II Fund, were added to Vanguard Diversified Value Portfolio. The restructurings also resulted in Barrow, Hanley, Mewhinney & Strauss (BHMS) no longer serving as an advisor to the three funds, Vanguard said. Vanguard Quantitative Equity Group, which has managed less than 1% of Windsor II Fund’s assets for the last 10 years, was also removed from the advisory team.

SS&C Salentica Eyes Several Product Initiatives for 2020

SS&C’s Salentica division is working on several product enhancements for next year, according to Dave Ireland, co-general manager.

First, the company plans to provide “additional value” to its Salentica Elements customer relationship management solution and Salentica Engage wealth management platform customers “by adding more core features,” including time and cost tracking, as well as vendor contract management tracking and compliance reporting, he told ThinkAdvisor.

Salentica also plans to add Digital Account Opening integration with both TD Ameritrade Institutional and Charles Schwab to the cloud-based Salentica Data Broker wealth management integration platform, he said.

Also on tap is the addition of real-time account integration with BNY Mellon’s Pershing subsidiary, he said.

Salentica will also be “deepening our integration with the Black Diamond Wealth Platform to provide real-time, two-way data synchronization on our Data Broker platform,” he said.

Fee compression is having a “trickle-down effect” on advisors, brokerage firms and technology providers including SS&C, Bob Conchiglia, vice president of advisory sales at SS&C Advent, told ThinkAdvisor. As a result, “there’s a greater need now for advisors to be able to show their value,” he said, adding: “That communication channel between the advisor and end investor is more critical than it’s ever been.” And technology from SS&C and other firms help advisors achieve that and provide “internal efficiencies” that help achieve that and are now “absolutely necessary from a financial standpoint as we go forward.”

Pimco Launches RAFI ESG U.S. ETF

Pimco introduced the RAFI ESG U.S. ETF, which the company said is benchmarked to the RAFI ESG US Index and “seeks to outperform market capitalization weighted indices, while investing in” environmental, social and governance-conscious companies.

The fund has a net expense ratio of 0.29% and uses Research Affiliates’ Fundamental Index approach that weights stocks by economic size instead of by market capitalization, and was “built on the principles of contrarian investing and disciplined rebalancing, offering the potential for improved returns,” Pimco said. That’s “paired with Research Affiliates’ unique approach to ESG, investing in ESG-conscious companies as well as incorporating two additional metrics linked to improved return potential — financial discipline and diversity,” Pimco said.

The new Pimco ETF “marries the performance potential of fundamental indexing with a unique approach to ESG, helping to drive the potential for improved returns over the broader market and social responsibility for investors,” according to Andrew Pyne, executive vice president and strategist focused on Pimco’s equity solutions.

Chubb’s New Bond Addresses Risks Faced by Asset Managers

Chubb introduced a new fidelity insurance solution, the Financial Institution Bond for Asset Managers, that it said was designed to address the unique range of risks faced by today’s asset managers that are associated with advancements in technology they use to manage assets.

The new bond provides modernized coverage for a variety of risks that can result in loss of customer capital. “These types of risks often stem from fraudulent activities of employees, computer hacking and impersonation of executives, clients, and counterparties,” Chubb said.

Chubb’s solution “provides an extra layer of protection for exposures that may not be covered under existing policies,” including financial loss resulting from unauthorized access to the firm’s computer systems by hackers, including the use of malware and viruses; unauthorized access to a firm’s network, including mobile applications and customer web portals; the transfer of the firm’s capital or its customers’ capital through fraudulent instructions over the internet, email or telephone; and, impersonation of an employee or known vendor that causes the firm’s funds to be fraudulently transferred by an authorized employee, it said.

“The asset management industry is growing at a rapid pace, and safeguarding customer capital is top of mind for asset managers,” according to Michael Mollica, executive vice president of Chubb North America Financial Lines. “Given today’s digital environment, it has never been more critical for asset management firms to ensure they have the right coverage in place to address a range of new risks,” he said in a statement.

IndexIQ Partners With Candriam on 2 New ESG ETFs

IndexIQ teamed with fellow New York Life Investments subsidiary Candriam to introduce two new ESG ETFs: the IQ Candriam ESG US Equity ETF (IQSU, with a 0.09% net expense ratio) and IQ Candriam ESG International Equity ETF (IQSI, 0.15% net expense ratio).

The ETFs track indexes that offer broad market exposure to large- and medium-cap companies that satisfy ESG criteria developed by Candriam that, like IndexIQ, is a boutique and global multi-specialist asset manager.

“As U.S. investors become increasingly interested in sustainable investing, high-quality ESG strategies with the potential to generate alpha are at a premium,” according to David Czupryna, head of ESG client portfolio management at Candriam.

Pacer ETFs Makes Its First Acquisition of Existing ETF

Pacer ETFs continued its expansion with its first acquisition of an existing ETF, the American Energy Independence ETF from SL Advisors. The purchase price wasn’t provided.

The AEI ETF has been renamed the Pacer American Energy Independence ETF and has total annual expenses of 0.75%.

The fund provides investors with “exposure to the growth potential of infrastructure development supporting domestic energy supplies,” according to Pacer ETFs, which said it surpassed $5 billion in assets under management in October, a milestone that it achieved in just four years.

— Check out last week’s portfolio product roundup here: T. Rowe Price Introduces China Evolution Equity Fund: Portfolio Products.

Jeff Berman

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