Vanguard Shareholders To Save Estimated $80 Million Through Broader Access To Low-Cost Admiral Shares

Summary

  • Vanguard lowers investment minimum of Admiral Shares of 38 index funds to $3,000, for estimated $71 million in aggregate savings
  • Lowered minimums represent savings up to 71% over corresponding Investor Shares
  • Vanguard to launch new low-cost Admiral Shares on five index funds, including Vanguard FTSE Social Index Fund, for estimated $10 million in aggregate savings

VALLEY FORGE, PA (November 19, 2018)—Vanguard is continuing to lower the cost of investing for nearly 1.5 million clients by broadening the availability of its low-cost Admiral Shares. Effective today, minimum investment requirements for Admiral Shares will be lowered from $10,000 to $3,000 for 38 index funds, which is expected to deliver an estimated $71 million in aggregate savings, based on current total assets[i]. This is in addition to the estimated $625 million in cumulative savings that Vanguard has created for its clients over the last three years alone[ii].

“No other firm in the industry has demonstrated Vanguard’s track record of delivering cost savings and value to its clients,” said Vanguard CEO Tim Buckley. “Our unique, client-owned structure enables us to consistently pass along economies of scale and lower the cost of investing for our clients, so they keep more of their returns.”

The lowered minimums represent expense savings of 15% to 71% over the Investor Shares, depending on the fund. Among the 38 funds are the industry’s two largest equity index funds (the $707.6 billion Vanguard Total Stock Market Index Fund and the $431.2 billion Vanguard 500 Index Fund) and the industry’s largest bond index fund (the $199 billion Vanguard Total Bond Market Index Fund).

Vanguard also filed a preliminary registration statement with the Securities and Exchange Commission to launch Admiral Shares of five index funds: Vanguard FTSE Social Index Fund, Vanguard FTSE All-World ex-US Small Cap Index Fund, Vanguard High Dividend Yield Index Fund, Vanguard Long-Term Bond Index Fund, and Vanguard Total World Stock Index Fund. The new shares are expected to be available for investment in the first quarter of 2019 and, with the new lowered minimum of $3,000, are expected to deliver an additional $10 million in aggregate savings, based on current total assets[iii].

Admiral Shares were introduced by Vanguard in November 2000 to pass along the cost savings associated with large and long-tenured accounts. This is the third time Vanguard has lowered the minimum required for Admiral Shares since their introduction.

Continued growth fuels lower costs and innovation

Over the last three years, Vanguard has experienced industry-leading growth, with investors entrusting more than $973 billion in net new cash flow to Vanguard funds[iv], and the firm’s global assets under management have grown to more than $5.3 trillion.

As such, Vanguard has been able to continuously deliver costs savings to clients across its product and service line-up, bringing its complex-wide average expense ratio to an all-time low of 0.11%—one-fifth the industry average[v]. Since its founding, Vanguard has reduced expense ratios more than 2,000 times—across all asset classes, product types, and strategies. Vanguard has also lowered the cost of ETF ownership, offering the largest suite of commission-free ETFs available to investors by eliminating online commissions on 90% of U.S. ETFs[vi].

At the same time, Vanguard has also continued to invest in its global product offerings and expand its investment capabilities, as well as continuously reinvest to improve the overall client experience across all of its businesses. Vanguard has devoted considerable resources to enhance digital capabilities, explore and adopt emerging technologies, and develop secure and intelligent solutions to better serve its diverse client base. An indexing pioneer, Vanguard has also led product innovation and the adoption of low-cost, passive investing across the globe.

“We continue to innovate as an index manager and use our scale as a strategic advantage,” said Mr. Buckley. “We are selective with our benchmarks, thoughtful with our replication and optimization strategies, prudent with our securities lending, and are home to some of the most tenured and experienced indexing teams in the industry.”

The firm was also an early proponent of ETFs as a means to broaden the availability of passive strategies and, with $993 billion in global ETF assets under management, now serves as one of the industry’s leading ETF issuers. Vanguard recently added to its carefully defined line-up of 80 U.S. ETFs, most recently bringing cost competition to the ESG category with two new ESG ETFs. In February 2018, the firm also broadened its line-up by introducing the firm’s first actively managed factor ETFs.

Vanguard offers more than 360 funds spanning active and index strategies across global asset classes, managed by distinguished internal and external managers. Vanguard’s global investment management capabilities drive efficiencies, higher value, and competitive performance for fund shareholders, leveraging scale and execution expertise. Vanguard employs a proprietary, state-of-the-art portfolio management and trading system to seamlessly and continuously manage investment portfolios around the world, through a single platform and 32-hour trading day.

The minimum requirement to qualify for Admiral Shares of Vanguard’s actively managed stock and bond funds will remain at $50,000. Qualifying clients can convert to Admiral Shares by visiting vanguard.com. Any remaining Investor class shareholders will be automatically converted to Admiral Shares beginning in the second quarter of 2019. Share conversions within the same fund are tax-free.

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About Vanguard Vanguard is one of the world’s largest investment management companies. As of September 30, 2018, Vanguard managed $5.3 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 400 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.

 All asset figures as of September 30, 2018, unless otherwise noted.

 Vanguard is client-owned. As client owners, individual shareholders own the funds that own Vanguard.

 All investing is subject to risk, including the possible loss of the money you invest.

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.   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.

Vanguard Marketing Corporation, Distributor of the Vanguard Funds.

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

[i] Estimated savings for the identified funds is the difference between prior and current expense ratios multiplied by eligible average AUM. Eligible average AUM is based on the daily average assets over the last 12-months (November 2017 to October 2018).

[ii] Based on expense ratio reductions reported on more than 500 mutual fund and ETF shares, based on total assets. Cumulative figure for all share classes from the 2015-16 fiscal year through the 2017-18 fiscal year for the U.S. domiciled 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.

[iii] Estimated savings for the identified funds is the difference between prior and current expense ratios multiplied by eligible average AUM. Eligible average AUM is based on the daily average assets over the last 12-months (November 2017 to October 2018).

[iv] Represents total net new cash flow from January 1, 2015 through December 31, 2017.

[v] Vanguard average mutual fund and ETF expense ratio: 0.11%. Industry average mutual fund and ETF expense ratio: 0.62%. All averages are asset-weighted. Industry averages exclude Vanguard. Sources: Vanguard and Morningstar, Inc., as of December 31, 2017.

[vi] Commission-free trading of Vanguard ETFs applies to trades placed both online and by phone. Commission-free trading of non-Vanguard ETFs excludes leveraged and inverse ETFs and applies only to trades placed online; most clients will pay a commission to buy or sell non-Vanguard ETFs by phone. Commission-free trading of non-Vanguard ETFs also excludes 401(k) participants using the Self-Directed Brokerage Option; see your plan's current commission schedule. All ETFs are subject to management fees and expenses; refer to each ETF's prospectus for more information. Account service fees may also apply. All ETF sales are subject to a securities transaction fee. See the Vanguard Brokerage Services commission and fee schedules for full details.