Vanguard Announces Plans for New Actively Managed Equity Fund
VALLEY FORGE, PA, December 22, 2009 -- Vanguard has announced plans to introduce its first actively managed equity fund that invests primarily in small- to mid-capitalization U.S. value stocks. The firm has filed a registration statement with the Securities and Exchange Commission to offer Vanguard Explorer Value Fund, which is expected to be available for purchase in the first quarter of 2010.
It marks the first time since the launch of Vanguard PRIMECAP Core Fund that Vanguard is introducing a new fundamentally managed equity fund.
"Over the past few years, Vanguard has focused primarily on building our lineup of low-cost index funds and ETFs," said Vanguard CEO Bill McNabb. "Today, we’re rounding out our stable of active equity funds by creating a value fund that focuses on small- to mid-sized companies."
Complementing the $7.9 billion growth-oriented Vanguard Explorer Fund, the new fund will be value-oriented, seeking long-term capital appreciation by investing in companies at attractive valuation levels. The fund will employ three advisory firms, each of which adheres to a bottom-up, fundamental approach to stock selection. Two of the three firms, Cardinal Capital Management, LLC and Sterling Capital Management LLC, are new advisors to Vanguard.
Cardinal will use a cash-flow-oriented investment process in the management of the fund. The firm, founded in 1995 and based in Greenwich, Connecticut, has $1.1 billion in assets under management.
Sterling will seek to identify stocks of quality companies selling at large discounts to the underlying value of the business. Founded in 1970 and based in Charlotte, North Carolina, Sterling manages $12 billion.
Frontier Capital Management Co., LLC, will work to identify companies that are mispriced relative to their long-term intrinsic value. Founded in 1980, the Boston-based firm is owned jointly by its management team and Affiliated Managers Group, Inc., and manages more than $6 billion in assets. Frontier Capital has served as co-advisor to Vanguard Morgan Growth Fund since 2008.
It is expected that each of the advisors will initially manage a third of the fund’s assets.
With the addition of Sterling and Cardinal, Vanguard’s network of external advisory firms will include 28 distinguished investment management organizations located around the world. Vanguard has successfully employed the multimanager approach since 1987, with 13 of the company’s 28 actively managed stock funds employing two or more advisors today.
Vanguard Explorer Value Fund will require a minimum initial investment of $10,000. The fund is expected to have an expense ratio of 0.59%, which is far below the 1.51% expense ratio of the average small-capitalization fund, according to Lipper (2008).
About Vanguard
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages more than $1.3 trillion in U.S. mutual fund assets. Vanguard offers more than 160 funds to U.S. investors and more than 50 additional funds in non-U.S. markets
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