Vanguard Moves to Simplify Offerings, Lower Costs

In its continuing efforts to simplify investing and to lower costs, Vanguard announced today that it is… 

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– Making ultra-low-cost Admiral Shares on its index funds more broadly available to clients and phasing out Signal Shares. Retail clients will have access to Admiral Shares of for an additional eight index funds; advisor and institutional clients will no longer be subject to minimum requirements on Admiral Shares of 41 index funds.
– Planning to introduce Admiral Shares of the $20 billion Vanguard Dividend Appreciation Index Fund, which will bring to 50 the number of Vanguard index funds offering Admiral Shares.
– Streamlining its investment offering by merging five funds.
– Reducing transaction fees on three index funds.
Vanguard increases access to admiral shares to bring lower costs to more clients
Vanguard today announced that it will make the ultra-low-cost Admiral SharesTM of its index funds available to more individual, advisor, and institutional clients. The firm also plans to streamline its share class offerings by gradually phasing out Signal Shares®.
Vanguard introduced Admiral Shares in November 2000 to recognize and encourage the cost savings associated with large and long-tenured accounts by passing along these savings to shareholders in the form of lower fund expense ratios. In October 2010, Vanguard lowered the minimum investment requirements to qualify for the Admiral Shares of its broad-market index funds for most retail clients from $100,000 to $10,000 and removed tenure requirements. As of today, 83 funds, including 49 index funds, offer Admiral Shares, some of which feature expense ratios as low as 0.05%.
Signal Shares were launched in 2006 to offer a distinct low-cost share class to qualifying Vanguard financial advisor and institutional clients. Vanguard is moving to close Signal Shares of 25 index funds to new investors, and over time will phase out this share class by either renaming Signal Shares or converting them to Admiral Shares.
The changes are summarized below.
– Individuals gain access to Admiral Shares of eight funds. For eight of its index funds, Vanguard today changed the name of Signal Shares to Admiral Shares, a move that enabled retail clients with a minimum investment of $10,000 to qualify for the lower-cost shares. For example, Signal Shares of the $7 billion Vanguard Short-Term Corporate Bond Index Fund have been renamed Admiral Shares. The Admiral Shares will retain the ticker VSCSX and the name change is expected to have no impact on the expense ratio, which is 0.12% as of the last fiscal year. (See attachment for the other seven index funds affected.)
–         Admiral Share minimums eliminated for 24 funds. Beginning today, Vanguard is eliminating the $10,000 minimum investment required for financial advisors and institutions to qualify for Admiral Shares of 14 index funds, and the $100,000 minimum investment required for Admiral Shares of 10 sector index funds. This will be the first time these funds (which do not currently offer Signal Shares) will be available to advisors and institutions without a minimum.
– Admiral Share minimums eliminated for 17 funds; Signal Shares to convert. Vanguard is also eliminating the $10,000 minimum investment required for financial advisors and institutions to qualify for Admiral Shares of 17 index funds that currently offer Signal Shares. Vanguard plans to convert these Signal Shares to Admiral Shares in October 2014, although clients have the option to immediately convert their shares on a tax-free basis. (The expense ratios of Admiral Shares and Signal Shares are the same. See attachment for the complete list of funds.)
“For nearly four decades, Vanguard has been dedicated to lowering the cost of investing for our clients and simplifying investing with us,” said Vanguard CEO Bill McNabb. “The expansion of Admiral Shares will bring stock, balanced, and bond index funds with very low expense ratios to clients who invest with us directly, as well as to the growing number of investors and participants who are served by our advisor and retirement plan sponsor clients.”
Mr. McNabb noted the success of Admiral Shares in lowering the cost for clients, stating that before today’s announcement over $700 billion was held in the share class, which accounts for about one-third of Vanguard’s nearly $2.3 trillion in U.S. fund assets under management.
Popular dividend index fund to offer Admiral Shares
Vanguard also plans to add Admiral Shares to the $20 billion Vanguard Dividend Appreciation Index Fund. The new share class will feature an estimated expense ratio of 0.10% and is expected to be available for purchase in December.
Transaction fees lowered on three index funds
Vanguard is reducing the transaction fees on three funds, effective today.

Transaction fees are paid directly to the funds to cover the costs of purchasing or selling securities, including brokerage commissions and market impact costs. Such costs are not reflected in fund expense ratios. The purpose of the fee is to allocate transaction costs associated with acquiring securities to investors making new share purchases or redemptions. Without such fees, the funds’ existing long-term shareholders would pay for the transaction costs, and the funds would experience reduced investment performance and increased “tracking error” with respect to their target benchmarks.

Source: ETFWorld – Vanguard

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