Monday, July 14, 2014
Inquirer Daily News

Vanguard cuts mutual fund penalty fees

Ends 2% "back-end" charge that discouraged market-timing

Vanguard cuts mutual fund penalty fees

Vanguard Group, the Malvern-based company that's become the largest and fastest-growing mutual fund distributor since stock market returns fell in the early 2000s and investors became more concerned about reducing investment fees, has stopped charging fees of up to 2% that it had used to punish investors who bought funds and sold them too soon.

Vanguard founder John Bogle discouraged mutual-fund "market timing", preferring to attract "long-term" investors.

"Because we have other measures in place to protect the interests of long-term investors and to discourage frequent trading, we determined that we no longer needed this fee," Vanguard said in this statement, which also lists the former fees and trading time limits.

"Vanguard has stripped the back-end loads off of virtually all of its funds," including foreign stock funds, health, energy and other industry-sector funds, Primecap, junk bond, and Select Value funds, writes Dan Wiener, Brooklyn-based publisher of the Indepdent Adviser for Vanguard Investors newsletter. "Only World ex-U.S. SmallCap and Global ex-U.S. Real Estate retain back-end loads or fees," he added.

The former "back-end fees reflect(ed) poorly on a company that wants to be seen as consumer-friendly, and it wouldn’t surprise me if some portfolio managers told Vanguard that, with zero-transaction fee ETFs as competition, asset flows were simply not keeping up with expectations," Wiener wrote. Most of the funds that charged the fees, he noted, "have seen net asset outflows (redemptions) over the last six months and last year."


 

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

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