Vanguard announced that the $50 billion Vanguard Emerging Markets Stock Index Fund, including its ETF share class (ticker: VWO), will begin tracking a new FTSE transition index, in the first phase of a two-phase change to a new target index, FTSE Emerging Markets All Cap China A Inclusion Index. This change will be effective with the opening of trading on November 2, 2015.
To minimize market impact, in the first phase, the fund will track the FTSE Emerging Markets All Cap China A Transition Index, an interim index that will gradually increase exposure to small-capitalization stocks and China A-shares while proportionately reducing exposure to other stocks based on their weightings in the new index. The transition is expected to occur over approximately 12 months and will reduce the costs associated with trading large amounts of securities in a short period. To provide transparency to shareholders during the transition, FTSE will supply monthly updates of the transition index’s composition at ftse.com/vanguard.
In the second phase, at the conclusion of the transition, the fund will track its new target index, the FTSE Emerging Markets All Cap China A Inclusion Index,1 which is a market-capitalization-weighted index made up of approximately 3,500 common stocks of large-, mid-, and small-cap companies located in emerging markets around the world. As a result, Vanguard Emerging Markets Stock Index Fund will be the first broad-based market-capitalization weighted index fund to include both all-cap exposure and China A-shares.2 These changes move investors closer to full market-cap weightings and provide investors with more complete and diversified exposure to China, a key emerging economy with the world’s second-largest gross domestic product and stock market.3
The transition is part of the changes to four international equity index funds announced by Vanguard in June 2015.
Vanguard is one of the world’s largest investment management companies. As of September 30, 2015, Vanguard managed $3.2 trillion in global assets, including $445 billion in ETF assets. The firm, headquartered in Valley Forge, Pennsylvania, offers 302 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.
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1 FTSE Emerging Markets All Cap China A Inclusion Index comprises large-, mid- and small-cap securities of the FTSE Emerging All Cap Index and FTSE China A All Cap Index. The weight of the FTSE China A All Cap Index in the FTSE Emerging Markets All Cap China A Inclusion Index will be adjusted by the quota available to international investors.
2 Source: Bloomberg, as of September 30, 2015.
3 China A-shares make up about 9.4% of world stock market capitalization, second-largest after the U.S. stock markets. With the world's second-largest GDP, China also accounted for 13.3% of world GDP in 2014, according to Bloomberg WCAP.
All asset figures are as of September 30, 2015, unless otherwise noted. Source: Vanguard.
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