Vanguard cuts fees again, 12 percent at Strategic Equity Fund

Mon Jan 28, 2013 11:16am EST

Jan 28 (Reuters) - Vanguard Group, the No. 1 U.S. mutual fund company, says it is reducing more fees, targeting four actively managed funds, including a 12 percent cut at the $3.3 billion Strategic Equity Fund, and many of its popular target retirement funds.

The moves, announced on Monday and last week, followed Vanguard's decision last month to lower fees across dozens of its index-tracking stock and bond funds, following similar actions by competitors. The cuts at the actively managed funds will help Vanguard's three major customer groups: individual investors who buy from Vanguard directly, 401(k) plan participants and investment advisers.

On Monday, Vanguard said it was lowering expenses at most of the funds in its target retirement fund series. The funds have become a staple in 401(k) accounts and automatically allocate money across stocks and bonds, based on an investor's retirement date.

According to Vanguard, about $132 billion is invested in its target date funds. The largest is the $18.7 billion Target Retirement 2020 Fund.

Intense competition among managers of index mutual and exchange-traded funds (ETFs) has led to sharp price cutting across the industry over the past few months.

BlackRock Inc, the largest ETF manager, and brokerage firm Charles Schwab Corp both announced price cuts last year.

Vanguard, which oversees some $2 trillion in assets, also said it raised the expense ratio at one fund, the $715 million Vanguard Growth Equity Fund, which seeks long-term capital appreciation among mid-size and large companies. The expense ratio went to 0.54 percent from 0.52 percent, a rise of 3.8 percent.

For the most part, the latest expense cuts were effective Jan. 25 and aimed at solidifying its low-cost advantage compared to peers.

At the dividend-seeking $10 billion Vanguard Equity Income Fund, the expense ratio for investor shares was lowered to 0.30 percent from 0.31 percent, a reduction of 3.2 percent.

The peer average expense ratio is 1.27 percent, according to Lipper Inc, a Thomson Reuters company.

The $4.7 billion Vanguard PRIMECAP Core Fund, targeting out-of-favor stocks, cut its expense ratio to 0.50 percent from 0.51 percent, a reduction of 2 percent.

The biggest cut was at the Vanguard Strategic Equity Fund, which lowered its expense ratio 12 percent to 29 basis points, or 0.29 percent, from 0.33 percent. The fund invests in small- and mid-cap U.S. stocks.

The $261 million Vanguard Strategic Small-Cap Equity , which hunts for small, growth-oriented companies, cut its expense ratio to 0.40 percent from 0.43 percent, a reduction of 7 percent.

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