Vanguard today announced it would seek shareholder approval to merge the $1.1 billion Vanguard U.S. Value Fund into the $77.2 billion Vanguard Value Index Fund. Effective immediately, Vanguard U.S. Value Fund is closed to new shareholder accounts. The firm also announced plans to seek shareholder approval to change the diversification status of five funds.
Like other U.S. investment companies, Vanguard holds a proxy when shareholder approval is needed for certain fund matters. Following review by the U.S. Securities and Exchange Commission (SEC), the fund proxy materials are expected to be sent to Vanguard fund shareholders beginning in November 2020 for voting online, by phone, or by mail. Vanguard encourages online voting for shareholder convenience and associated cost savings. The shareholder meeting—which will be held in a virtual format—is scheduled for January 22, 2021.
“We encourage shareholders of the six funds to vote on these important proposals,” said Tim Buckley, Vanguard Chairman and CEO. “We believe the proposed changes will enable Vanguard to manage these funds more efficiently and effectively, and continue to deliver strong outcomes for investors.”
The proposals are summarized below.
Vanguard U.S. Value Fund merger
Vanguard will be seeking shareholder approval to merge Vanguard U.S. Value Fund into Vanguard Value Index Fund. Vanguard U.S. Value Fund is closed to new shareholder accounts, effective immediately.
Introduced in 1992, Vanguard Value Index Fund is a broadly diversified, large-capitalization U.S. value portfolio. If approved, the merged fund would retain the Vanguard Value Index Fund name and current expense ratio of 0.05%—a decrease of 0.17% for existing Vanguard U.S. Value Fund shareholders.
The proposed merger is a result of Vanguard’s ongoing and comprehensive fund oversight program. Given the funds have a significant overlap in holdings, similar characteristics, and highly-correlated returns, Vanguard determined a merger would be the most beneficial path for Vanguard U.S. Value Fund shareholders and result in greater efficiencies in the administration of the combined Vanguard Value Index Fund.
Vanguard has a long history of product innovation and has continued to enhance and refine its global fund and ETF roster. In addition, the firm’s rigorous product governance ensures a carefully curated and enduring lineup that meets a diverse range of client needs. Recent efforts to improve its product lineup include: introducing new funds and modifying mandates, restructuring advisory teams, closing and liquidating funds, and partnering with world-class active management talent.
Change in diversification status for five Vanguard funds
Vanguard will also be seeking shareholder approval to change the diversification status of Vanguard Health Care Fund, Vanguard Energy Fund, Vanguard U.S. Growth Fund, Vanguard Variable Insurance Fund – Growth Portfolio, and Vanguard Variable Insurance Fund – Real Estate Index Portfolio.
Due to increased concentration within each fund’s investment universe, Vanguard is proposing to reclassify the funds from “diversified” to “non-diversified” as defined by the Investment Company Act of 1940. The change would afford the funds’ investment advisors greater flexibility to manage their respective mandates, while not materially altering the funds’ characteristics.
Vanguard is one of the world’s largest investment management companies. As of June 30, 2020, Vanguard managed $6.1 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 427 funds to its more than 30 million investors worldwide. For more information, visit vanguard.com.