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14
Vanguard Cuts Target-Date Fees
Vanguard announced it will roll out a new institutional
fund for its Target Retirement lineup. With an esti-
mated expense ratio of just
0
.
10%
, the new funds will
be the lowest-priced target-date mutual funds avail-
able. The move undercuts Fidelity, which currently offers
the industry’s lowest-priced series, Fidelity Freedom
Index. Fidelity has room to fight back, as it is using a
waiver to keep fees for that series at
0
.
16%
and its
underlying funds cost just
0
.
09%
–
0
.
11%
. Vanguard’s
new series will also be competitive with, and some-
times cheaper than, other index-based target-date
funds offered via collective investment trusts, such as
BlackRock’s LifePath Index
CIT
series. Vanguard also
offers less-expensive target-date
CIT
s.
Vanguard’s new funds, directed at retirement-plan
providers, will require a
$100
million minimum initial
investment for investment-only clients, though record-
keeping clients will have no minimum requirement.
Vanguard’s current retail-focused funds charge
between
0
.
16%
and
0
.
18%
and require an individual
contribution minimum of
$1
,
000
. The firm’s retail
series passes along just the cost of its underlying
index funds, but by using Investor share classes rather
than the less expensive Admiral or Institutional share
classes, there was room for the series to shave
expenses. The new series will invest in a mix of those
three share classes, which suggests that Vanguard
should still have room to lower costs in the future.
The announcement of the new institutional series is
welcome news for plan sponsors.
In addition to creating a new, lower-cost series,
Vanguard will be making a change to the strategic
allocation of its multiasset lineup. By the end of
2015
,
the funds will boost their international-stock stake
to
40%
of stocks from
30%
, and they will increase
their international-bond exposure to
30%
of the bond
sleeve from
20%
. The firm doesn’t tweak its expo-
sures often, although since the
2003
launch of its
Target Retirement funds, Vanguard has steadily
Fund Manager Changes
Fund News
AMG GW&K Core Bond MBDFX
Impact:
Neutral
Date: 02-28-15
AMG fired PIMCO and replaced it with GW&K. It also renamed the fund from its former name AMG Managers
Total Return Bond Fund. The fund had been a near clone of PIMCO Total Return PTTRX but will now be run
by institutional money manager GW&K. Mary Kane will serve as manager. Kane has a brief two-year tenure at
AMG GW&K Enhanced Core Bond Investor MFDAX, which has performed well during her tenure.
|
Our
Take: The fallout from Bill Gross’ departure keeps coming. GW&K has a good reputation, but we don’t cover
any of its funds yet.
Buffalo Mid Cap BUFMX
Impact: Negative Date: 01-05-15
Kent Gasaway is leaving the fund to focus on Buffalo Small Cap BUFSX, and Dave Carlsen is replacing him as
comanager. Bob Male will remain as comanager.
|
Our Take: This is the second round of manager changes at
Buffalo in recent years, and it comes amid slumping performance. In addition, Carlsen doesn’t have a long and
meaningful track record. Thus, we have downgraded the fund to Neutral from Bronze.
Janus Global Research JAWWX
Impact: Neutral
Date: 12-01-14
Jim Goff stepped down as head of research and nominal manager of this fund. Carmel Wellso succeeds
him.
|
Our Take: This is a research fund that delegates stock selection to the analysts. In this case, the named
manager doesn’t have the same impact as at a typical actively managed fund.
Royce Low Priced Stock RYLPX and Royce Premier RYPRX
Impact: Neutral
Date: 11-10-14
Whitney George has left Royce after being mired in a severe slump. At Royce Low Priced Stock, Jim Stoeffel
is now the lead manager. He had been an assistant manager since 2013 and worked for Royce since 2009. At
Royce Premier, Chuck Royce shifts from comanager to sole lead manager.
|
Our Take: Stoeffel produced
decent results during a previous stint at CRM Small Cap Value CRISX, so there are some positives here, but he
doesn’t have George’s track record. The firm says that Royce Low Priced Stock will return to its roots with
lower-priced stocks and will shed the materials stocks that have killed performance. We lowered that fund to
Neutral. Premier’s change is less dramatic. George’s half of the portfolio will go to Royce, who was already
running the other half. We rate Royce Premier Silver.
T. Rowe Price International Stock PRITX
Impact: Negative Date: 04-01-15
Bob Smith is set to step down this year; Richard Clattenburg will take his place. Clattenburg has been with
T. Rowe Price since 2005, serving as an analyst and associate portfolio manager.
|
Our Take: Clattenburg lacks
a record, so it’s a big drop from the seasoned Smith. We’ve lowered our rating to Neutral.
Vanguard Convertible Securities VCVSX
Impact: Negative Date: 06-01-15
Veteran manager Larry Keele is stepping down and being replaced by Stuart Spangler.
|
Our Take: Oaktree is
an excellent firm so we remain confident in the fund, but it’s still a blow to lose Keele, who has built a great
record here. We lowered our rating to Bronze.
Vanguard Intermediate-Term Treasury VFITX,
Impact: Neutral
Date: 01-02-15
Vanguard Long-Term Treasury VUSTX,
Vanguard Short-Term Treasury VFISX
Gemma Wright-Casparius has replaced David Glocke as manager of the three funds. Wright-Casparius is
head of Vanguard’s TIPS and Treasuries group and manager of Vanguard Inflation-Protected Securities VIPSX
fund.
|
Our Take: The fund remains in good hands. We have affirmed our Silver rating on the funds.
Vanguard Short-Term Federal VSGBX
Impact: Neutral
Date: 01-02-15
Brian Quigley has replaced Ron Reardon as portfolio manager of this fund. Quigley has worked on the fund
since 2007.
|
Our Take: Quigley is experienced, and the fund doesn’t have much flexibility to begin with, so we
don’t expect any big changes. We are maintaining our Silver rating.