Vanguard merges $ 770 million capital value fund

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Vanguard has plans to merge the $ 770 million Vanguard Capital Value fund into 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 under-advised by Wellington Management, with Citywire + rated Wellington manager David Palmer being the sole manager of the fund.

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

Palmer is already the only manager named on the Wellington portfolio of the Windsor fund, while the Pzena mandate is led by Richard Pzena, Benjamin S. Silver and John Flynn.

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

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

“Windsor hasn’t really been a powerhouse relative to Capital Value, although it has outperformed slightly,” said Daniel Wiener, co-founder and chairman of Adviser Investments and editor-in-chief of Independent advisor to Vanguard investors bulletin.

The Windsor fund was ranked 150 out of 325 high-value funds tracked by Citywire for three-year total returns at 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 during the three-year period.

Wiener also said that while value stocks have “been pretty ugly for a while,” the Capital Value fund has suffered particularly.

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

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

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


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