Vanguard reported expense ratios changes today for funds with fiscal years ending January 31, 2017, marking the final round of changes covering the 2016 – 2017 fiscal year period. Over the past six months, 226 Vanguard mutual fund and ETF shares reported expense ratio decreases for an estimated $337 million in cumulative savings based on total assets.1 Over this same period, 160 fund shares reported no change and 14 fund shares reported an increase in expense ratios.
“Lowering costs can give our clients a better chance for investment success. In fact, more than 50% of our investment offerings -- spanning all product types, asset classes, and management styles -- have reported expense ratio reductions over the last six months,” said Vanguard CEO Bill McNabb. “We continue to look for ways to reduce the cost of investing. At the same time, we are also investing in people and technology to protect our clients’ assets, help improve their fund performance, and serve them more effectively and efficiently with the ultimate goal of improving their outcomes and overall investing experience at Vanguard.”
Four Vanguard mutual funds and one ETF are reporting lower expense ratios:
Six actively managed mutual funds reported an expense ratio increase, three of which were a result of performance incentives and three of which were due to increased expenses:
ALIGNING CLIENT AND ADVISOR INTERESTS
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.
In the case of the Investor and Admiral shares of the Vanguard Health Care Fund and the Vanguard Precious Metals and Mining Fund, the increases in their respective expense ratios was a result of an incentive payment. These funds outperformed their benchmarks over a pre-established performance period and an adjustment was made to the base advisory fee of the advisors. Vanguard is among the few firms in the investment management industry to employ incentive/penalty arrangements.
Vanguard is one of the world’s largest investment management companies. As of April 30, 2017, Vanguard managed $4.3 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 368 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.
1Cumulative figure for all share classes from December 2016 through May 2017 for the identified funds. Estimated savings 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.
Assets figures as of April 30, 2017 unless otherwise noted.
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 vanguard.com 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.
Past performance is no guarantee of future results.
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.
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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