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Market News

Vanguard cuts minimum balances for low-cost shares

BOSTON, Oct 6 (Reuters) - Vanguard Group Inc said on Wednesday it is cutting costs for nearly 2 million of its investors by lowering the minimum account balances needed to buy its low-cost Admiral shares.

The move is the latest step in a price war among large mutual fund companies competing to attract investors spooked by volatile stock markets in recent years. It also reflects how Vanguard’s total assets have soared lately as investors have snapped up its low-cost index funds and bond funds.

“We have benefited from significant growth recently, so we’re passing on those economies of scale,” said Tim Buckley, Vanguard’s top retail executive, in a telephone interview.

Vanguard had the most assets of any mutual fund firm in August according to data released by Financial Research Corp of Boston on Tuesday that excluded money-market funds. The Pennsylvania company had $1.19 trillion under management, up 32 percent from a year earlier, FRC said.

Vanguard said that for most retail clients it will lower the minimum account balances needed to buy the low-cost Admiral shares in most stock and bond index funds to $10,000 from $100,000.

For actively-managed stock and bond funds the the minimums will fall to $50,000 from $100,000. A total of 52 Vanguard funds offer the Admiral class shares with the new requirements; an investor in the company’s popular Total Stock Market index fund would see the expense ratio fall to 7 basis points from 18, for instance, the company said.

Previously just 500,000 Vanguard investors were able to buy the Admiral class shares, Buckley said. (Reporting by Ross Kerber. Editing by Robert MacMillan)

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