News release

Vanguard Reports Lower Expense Ratios For 21 Fund Shares Resulting In $20 Million In Savings For Investors

VALLEY FORGE, PA (January 27, 2017)—Vanguard clients saved an estimated $20 million based on total assets and lower expense ratios reported across 21 individual mutual fund shares, including three quantitative equity funds and six target-date funds.* Last month, the firm reported lower expense ratios for shares of 35 funds representing estimated savings of $13 million based on the funds’ total assets.**

This second wave of Vanguard funds to report expense ratio changes encompasses funds with fiscal years that ended in September 2016. Vanguard will announce any additional expense ratio changes as funds update their prospectuses in the coming months. Expense ratios represent the actual operating expenses for the prior fiscal year (including investment advisory fees, administrative costs, and shareholder-service expenses) and are reported on an annual basis in the prospectus in accordance with Securities and Exchange Commission requirements.

Vanguard has consistently lowered its fund and exchange-traded fund (ETF) expense ratios as a result of asset growth from strong cash inflows and positive fund performance. Under Vanguard’s unique mutual operating structure, economies-of-scale savings are passed directly to fund investors in the form of lower expense ratios. Unlike those of some other firms, Vanguard expense ratio reductions span the firm’s full range of investment strategies (traditional active, quantitative active and index); product type (traditional fund and ETF); and fund type (stock, balanced, bond, and money market fund).

In this latest set, Vanguard funds declaring expense ratio reductions include:

Quantitative Equity Funds

The expense ratio of the $6.6 billion Vanguard Strategic Equity Fund dropped three basis points to 0.18%, that of the $1.5 billion Vanguard Strategic Small-Cap Equity Fund dropped five basis points to 0.29%, and that of the $1.5 billion Vanguard U.S. Value Fund dropped three basis points to 0.23%. 

These funds are managed by Vanguard’s Quantitative Equity Group (QEG), which was started in 1991 by Vanguard founder John C. Bogle and then-Chief Investment Officer Gus Sauter. Today, QEG manages about $30 billion across 34 mandates, including the $2 billion Vanguard Market Neutral Fund, for which it was named Morningstar’s 2015 Alternatives Fund Manager of the Year.*** QEG broadened its offerings in recent years to Vanguard’s institutional and advised clients; it now manages the $244 million Vanguard Alternative Strategies Fund, as well as Vanguard’s factor funds offered in the United States and abroad, including the $1.6 billion Vanguard Global Minimum Volatility Fund.

Target Retirement Funds

Six Vanguard Target Retirement Funds (TRFs) saw their expenses drop by 1 basis point each, including the $10.5 billion Vanguard Target Retirement Income Fund, the $5.6 billion Vanguard Target Retirement 2010 Fund, and the $17 billion Vanguard Target Retirement 2025 Fund. Their expense ratios fell to 0.13% for both the Target Retirement Income Fund and the Target Retirement 2010 Fund, and to 0.14% for the Target Retirement 2025 Fund. Three institutional target-date funds— the $2.2 billion Vanguard Institutional Target Retirement Income Fund, the $2 billion Vanguard Institutional Target Retirement 2010 Fund, and the $6.3 billion Vanguard Institutional Target Retirement 2015 Fund—reported lower expense ratios of 0.09%. (The 2010 funds are closed to new investors pending an announced merger in summer 2017 with their respective Retirement Income Funds.)

Vanguard TRFs for individuals now have expense ratios ranging from 0.13% to 0.16%, and TRFs for institutional investors have ratios ranging from 0.09% to 0.10%. Vanguard—the largest provider of target-date funds, with $450 billion in assets under management—estimates that $6 out of every $10 invested in target-date strategies in the United States goes into an index-based Vanguard TRF.****

Investments in TRFs are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.

Traditional Active Equity Funds

A total of six traditional active equity portfolios, some with multiple share classes, announced lower expense ratios, including the $952 million Vanguard Capital Value Fund, whose expense ratio decreased by 25 basis points to 0.25%. In this instance, the significant decrease is largely a result of a performance-based advisory fee adjustment.

Vanguard aligns the interests of its external investment advisory firms with those of shareholders by using incentive/penalty arrangements. Under the majority of Vanguard fund advisory agreements, an external advisor’s base advisory fee can be adjusted up or down to reflect the fund’s investment performance relative to the total return of an appropriate market benchmark over a 36- or 60-month period. In effect, the advisor is rewarded for outperforming a market benchmark and penalized for underperforming it. Vanguard is one of the few firms in the industry to employ performance incentive/penalty arrangements.

Admiral Shares of the $10.8 billion Vanguard Morgan Growth Fund reported an expense ratio increase of 1 basis point to 0.28%. The change is also largely a result of a performance-based advisory fee adjustment. Morgan Growth is the only fund in this set to report an increase.

Other traditional active equity funds reporting reductions include Vanguard PRIMECAP Fund, Vanguard PRIMECAP Core Fund, and Vanguard Wellesley Income Fund, which all saw expense ratio reductions of 1 basis point, and Vanguard Global Equity Fund, which saw a reduction of 6 basis points. In aggregate, Vanguard’s active equity funds have an average expense ratio of 0.27%, compared with the average expense ratio for all active stock funds industrywide of 1.14%.*****

Vanguard Short-Term Inflation-Protected Securities Index Fund also reported expense ratio declines of 1 basis point for its Investor, Admiral, Institutional, and ETF share classes. The accompanying fact sheet provides a complete list of the fund and ETF shares reporting expense ratio changes.

About Vanguard
Vanguard is one of the world’s largest investment management companies. As of December 31, 2016, Vanguard managed more than $3.9 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 350 funds to its more than 20 million investors worldwide. For more information, visit

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*Estimated savings for the identified funds is the difference between prior and current expense ratios multiplied by average AUM. Average AUM is based on daily average assets during a month, which are then averaged over the 12-months of the fiscal year ending September 30, 2016. 

** Estimated savings for the identified funds is the difference between prior and current expense ratios multiplied by average AUM. Average AUM is based on daily average assets during a month, which are then averaged over the 12-months of the fiscal year ending August 31, 2016. 

***The Morningstar Fund Managers of the Year awards recognize portfolio managers that Morningstar research analysts believe perform consistently well using a repeatable, well-executed process. The analysts considered only funds with Gold, Silver, or Bronze Morningstar ratings for the awards. 

The Morningstar Analyst Rating™ for funds is the summary expression of their forward-looking analysis of a fund. Morningstar Analyst Ratings are assigned globally on a five-tier scale running from Gold to Negative. The top three ratings, Gold, Silver, and Bronze, all indicate that their analysts think highly of a fund; the difference between them corresponds to differences in the level of analyst conviction in a fund’s ability to outperform its benchmark and peers through time, within the context of the level of risk taken. The Analyst Rating does not express a view on a given asset class or peer group; rather, it seeks to evaluate each fund within the context of its objective, an appropriate benchmark, and peer group. For more information on Morningstar’s methodology, go to Morningstar Analyst Rating™ for Funds Methodology Document.

**** Sources: Vanguard and Morningstar Inc.

*****Source: Lipper, a Thomson Reuters Company, as of December 31, 2015 (the most recent data available)

All asset figures are as of December 31, 2016, unless otherwise stated.

Vanguard provides its services to the Vanguard funds at cost. More information about Vanguard funds, including at-cost services, is available in a fund’s prospectus.

For more information about Vanguard funds and ETFs, visit or call 800-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Past performance is no guarantee of future results.

All investments are subject to risk, including the possible loss of the money you invest.

U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

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