Vanguard to merge Capital Value and Windsor funds
Vanguard is to merge the USD770 million Vanguard Capital Value Fund into the USD17.6 billion Vanguard Windsor Fund. Following the merger, which is expected to be completed in mid-2020, the combined fund will retain the Windsor Fund name and continue to focus on large- and mid-capitalisation value stocks.
The combined fund will continue to be managed by Wellington Management Company LLP (approximately 70 per cent of assets) and Pzena Investment Management, LLC (approximately 30 per cent of assets). David Palmer, CFA, manages Wellington Management’s portion of Windsor Fund and is currently the sole portfolio manager of Capital Value Fund. The Pzena team, along with Palmer, will oversee the combined fund.
“We apply a rigorous and comprehensive evaluation process to the oversight of our funds and advisors to ensure we are offering sound, enduring solutions that meet the long-term needs of our clients,” says Matt Brancato, head of Vanguard’s Portfolio Review Department. “We believe this merger will benefit Capital Value Fund shareholders by providing them with exposure to the two outstanding investment advisors managing the Windsor Fund and will benefit the combined fund through improved economies of scale.”
The expense ratios of Windsor Fund — 0.30 per cent for Investor Shares and 0.20 per cent for Admiral Shares — are not expected to change as a result of the merger. Following the merger, shareholders who are eligible for Admiral Shares may request a self-directed conversion at any time. Those who qualify for Investor Shares will experience an increase of one basis point. Notably, the expense ratio of Capital Value Fund is currently lower than that of the Windsor Fund’s Investor Shares, reflecting a performance-based investment advisory fee decrease of 17 basis points. Absent incentive/penalty adjustments, the advisor fees of Windsor Fund are lower than those of Capital Value Fund.
Vanguard has a long track record of product leadership and making changes that are in the best interest of shareholders, including merging funds, changing advisors, modifying mandates, and closing and liquidating funds. Over the past 12 months, the firm announced changes to Vanguard Managed Payout Fund; reopened Vanguard Dividend Growth Fund; modified the advisory teams of its Vanguard Windsor II Fund, Vanguard Selected Value Fund, and Vanguard Variable Insurance Fund-Diversified Value Portfolio; introduced three new funds; reduced fund and ETF expenses; and entered a strategic partnership to provide qualified investors access to private equity.