What You Need to Know
- The changes could lower costs for target date fund investors by $190 million, Vanguard says.
- Vanguard is merging its Institutional Target Retirement Funds into Vanguard Target Retirement Funds.
- It's also lowering the minimum for the Vanguard Target Trust II program from $250 million to $100 million.
Vanguard is making several changes to its target retirement funds that are expected to lower costs by an estimated $190 million and enhance accessibility and choice.
The mega asset manager is merging Vanguard Institutional Target Retirement Funds into Vanguard Target Retirement Funds, which will standardize and lower the expense ratios for each fund to 0.08% once the merger is completed, which is expected in February 2022.
The average expense ratio of Vanguard Target Retirement Funds is currently 0.12% while the average expense ratio for Vanguard Institutional Target Retirement Funds is 0.09%, according to a Vanguard spokeswoman.
Completion of the merger will also provide portfolio management and operational efficiencies as well as economies of scale, which could result in additional cost savings over time, according to Vanguard.
“Our unique client-owned structure allows us to share our success with clients through lower fees,” said Vanguard Chairman and CEO Tim Buckley, in a statement.