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Vanguard to Merge Cap Value, Windsor Fund

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Vanguard said Monday that it plans to merge the $770 million Vanguard Capital Value Fund into the $17.6 billion Vanguard Windsor Fund by mid-2020. The combined fund will keep its Windsor Fund name and its portfolio focus on large- and mid-capitalization value stocks. 

Wellington Management and Pzena Investment Management will continue to manage about 70% and 30% of assets, respectively. David Palmer, CFA, leads Wellington’s portion of Windsor Fund and is the sole portfolio manager of Capital Value Fund; he and the Pzena team will oversee the merged fund.

“We believe this merger will benefit Capital Value Fund shareholders by providing them with exposure to the two outstanding investment advisors managing the Windsor Fund and will benefit the combined fund through improved economies of scale,” said Matt Brancato, head of Vanguard’s Portfolio Review Department, in a statement.

Vanguard says the expense ratios of Windsor Fund are 0.30% for Investor shares and 0.20% for Admiral shares. 

After the merger, shareholders eligible for Admiral shares can request a self-directed conversion at any time. Those qualifying for Investor Shares will see an increase of one basis point. 

The expense ratio of the Capital Value Fund is now lower than that of the Windsor Fund’s Investor Shares, after a performance-based investment advisory fee drop of 17 basis points, according to Vanguard. 

Absent any incentive/penalty adjustments, the advisor fees of Windsor Fund should be lower than those of Capital Value Fund, the fund giant explains. It adds that it “negotiates fee schedules with advisors at levels well below industry averages” and uses performance-based incentive/penalty arrangements to “align the interests of advisors and shareholders.”