NEW YORK, Oct 9 (Reuters) - Vanguard Group Inc. is closing its top-performing value fund to new investors, deeming it a 'cooling off' period, the largest U.S. manager of stock and bond mutual funds said on Friday.
The Vanguard Capital Value Fund, with $742 million in assets, is the firm's top-performing fund in 2009, posting total returns of 68.5 percent through the first nine months of the year. But assets in the fund have more than tripled since the end of February as a result of market appreciation and strong cash inflows, the Valley Forge, Pennsylvania, manager said in a statement.
'Despite our efforts -- at both a company and an industry level -- to educate investors about the perils of performance-chasing, we continue to be concerned about this behavior,' Vanguard CEO Bill McNabb said.
McNabb said the closure of the fund for a cooling-off period serves two purposes. 'First, it protects existing shareholders from higher transaction costs that can result from short-term-oriented investors moving in and out of the fund,' he said. 'Second, it protects prospective investors from themselves, as high-performing funds will almost certainly drop off at some point.'
Vanguard employed similar cooling-off periods for its High-Yield Corporate Fund in 2003 and its Health Care Fund in 1999. The funds reopened after six months and 10 months, respectively, as investor interest subsided and cash flows moderated.
(Reporting by Jennifer Ablan) Keywords: USA VANGUARD/CLOSURE (jennifer.ablan@thomsonreuters.com; +1-646-226-3379; jennifer.ablan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The Vanguard Capital Value Fund, with $742 million in assets, is the firm's top-performing fund in 2009, posting total returns of 68.5 percent through the first nine months of the year. But assets in the fund have more than tripled since the end of February as a result of market appreciation and strong cash inflows, the Valley Forge, Pennsylvania, manager said in a statement.
'Despite our efforts -- at both a company and an industry level -- to educate investors about the perils of performance-chasing, we continue to be concerned about this behavior,' Vanguard CEO Bill McNabb said.
McNabb said the closure of the fund for a cooling-off period serves two purposes. 'First, it protects existing shareholders from higher transaction costs that can result from short-term-oriented investors moving in and out of the fund,' he said. 'Second, it protects prospective investors from themselves, as high-performing funds will almost certainly drop off at some point.'
Vanguard employed similar cooling-off periods for its High-Yield Corporate Fund in 2003 and its Health Care Fund in 1999. The funds reopened after six months and 10 months, respectively, as investor interest subsided and cash flows moderated.
(Reporting by Jennifer Ablan) Keywords: USA VANGUARD/CLOSURE (jennifer.ablan@thomsonreuters.com; +1-646-226-3379; jennifer.ablan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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