US - Vanguard has expanded the range of funds in its defined contribution (DC) offering and modified the allocation path in its existing funds, taking the total number in the series to 11.
Five funds will be added to Vanguard’s Target Retirement Fund series with new target retirement dates set at 10-year intervals - 2010, 2020, 2030, 2040 and 2050.
The new funds will complement the manager’s six existing funds with investment horizons spanning from 2005 to 2045.
“Shareholders are attracted to the simplicity and convenience of having a professionally managed, diversified portfolio of stocks and bonds in a single fund,” commented Vanguard CEO John J. Brennnan.
“The introduction of five new funds will enable investors to select a fund that more closely matches their investment time horizon.”
The funds are a series of broadly diversified fund of funds that gradually reduce stock exposure and increase bond exposure as the targeted retirement date approaches.
In addition, Vanguard is increasing the exposure to equities in its existing funds over a longer period of time, taking the total portion 10-20% higher, depending on the fund.
“While the changes in the portfolio construction will result in modestly higher risk profiles for the funds, we believe that shareholders will benefit from broader equity diversification and higher return potential,” said Brennan.
Assets in the Target Retirement Funds are invested in a combination of Vanguard’s mutual funds including: Total Stock Market Index Fund; European Stock Index Fund; Pacific Stock Index Fund; Emerging Market Stock Index Fund; Total Bond Market Index Fund; Inflation-Protected Securities Fund and Prime Money Market Fund.
Weighted expense ratios of the funds range from 0.20% to 0.21% versus the 1.18% expense ratio of the average balanced fund (Lipper, 2006).
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