Vanguard merges $770 million Capital Value fund

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Vanguard has announced plans to merge the $770 million Vanguard Capital Value fund with the $17.6 billion Vanguard Windsor fund.

According to a filing with the Securities and Exchange Commission, the merger will be finalized on July 24.

The Capital Value fund was sub-advised by Wellington Management, with Citywire+ rated Wellington manager David Palmer serving as the sole manager of the fund.

The Windsor fund is sub-advised by Wellington and Pzena Investment Management, with the former managing 70% of the fund’s assets and the latter overseeing the remaining 30%.

Palmer is already the only named manager on the Windsor fund’s Wellington pocket, while the Pzena mandate is managed by Richard Pzena, Benjamin S. Silver and John Flynn.

“We believe this merger will benefit shareholders of the Capital Value fund by providing exposure to the two exceptional investment advisers who manage the Windsor fund and will benefit the combined fund through improved economies of scale,” said Matt Brancato, who leads Vanguard’s portfolio review department.

The company also said the Windsor fund’s 0.3% expense ratio for Investor shares and 0.2% expense ratio for Admiral shares are not expected to change.

“Windsor hasn’t exactly been a powerhouse relative to Capital Value, although it has outperformed a bit,” said Daniel Wiener, co-founder and chairman of Adviser Investments and editor of the Independent Advisor for Vanguard Investors newsletter.

The Windsor fund was ranked 150th out of 325 high-value funds tracked by Citywire for three-year total returns through the end of February, and it was up 12.9% from the category average of 12.3. %.

The Capital Value fund, in turn, was ranked 182nd out of the same 325 Large Value funds over the three-year period.

Wiener also said that while value stocks have been “pretty lousy for a while,” the Capital Value fund was particularly struggling.

According to data from Morningstar Direct, the Capital Value fund saw 11.9 million outflows in February, compared to $1.4 million inflows for the Windsor fund in the same month.

However, in the month of January, the Capital Value fund had inflows of $2.9 million compared to the Windsor fund’s $105 million outflow, and both funds had 12 months of consistent outflows between December 2018 and December 2019.

As of February 29, Vanguard had $5.9 billion in global assets, of which $1.4 billion was actively managed.

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