Vanguard's Bulk Share Selling: Housekeeping or Need for Liquidity?

Vanguard, one of the world's largest investment management companies and a leading provider of company-sponsored retirement plan services, has reopened its Vanguard Explorer Fund and Vanguard Health Care Fund to new shareholder accounts. Both had been closed in February 2006 and March 2005, respectively.

"We believe that the funds can accommodate additional assets at this time, given their current size and cash flow levels," said Vanguard Chairman and CEO Jack Brennan.

That pretty much goes without saying: Who CAN'T accommodate more capital at this point in time?

This would not have gained much attention at TFN, had it not been for the fact that each and every stock we looked up in Google today had "holdings reduced by Vanguard Group Inc." in the first line of its news coverage. In fact, Vanguard was shedding stock holdings like hair flying off a cat getting its temperature taken at the vet's office. Is this a portent for further market declines? Or is Vanguard in need of cash? Neither reason bodes well.

Among the ones sold were Pharmos Corp (PARS), Lumera Corp (LMRA), Mcf Corp (MERR), Digirad Corp (DRAD), Lsb Inds Inc (LXU), National Presto Inds Inc (NPK), Nacco Inds Inc (NC), Mitcham Inds Inc (MIND), Natural Alternatives Intl Inc (NAII), Mettler Toledo Intl Inc (MTD), Prestige Brands Hldgs Inc (PBH), Pico Hldgs Inc (PICO), Physicians Formula Hldgs Inc (FACE), Reddy Ice Hldgs Inc (FRZ), Mb Finl Inc (MBFI), Mainsource Finl Group Inc (MSFG), Mutualfirst Finl Inc (MFSF), Team Finl Inc (TFIN), Private Media Group Inc (PRVT), Blackstone Group LP (BBN.BE), Bitstream Inc (BITS), Meadowbrook Ins Group Inc (MIG), Penns Woods Bancorp Inc (PWOD), Beverly Hills Bancorp (BHBC), Danvers Bancorp (DNBK), Codorus Vy Bancorp Inc (CVLY), and a whole slew of other companies from every sector and every category. I could go on for hours...

Vanguard manages nearly $1.25 trillion in U.S. mutual fund assets, including more than $360 billion in employer-sponsored retirement plans.

Are we merely looking at some start-of-Q3 housekeeping? Or is the sudden sell-off of equity, combined with the re-opening of the two closed funds and indication that the company may be in dire need of liquidity?

Inquiring minds want to know: Let us know what you think... or what information you may have on this.

Disclosure: None

Comments

[fatcat:]

According to what I've read at various sources,redemptions are hot at a lot of funds.There also lots of shifting to money markets,which would trigger stock sales..

2008 Aug 08 09:35 AM

[User 240336:]

Vanguard is having alot of changes. I mailed in several thousand dollars of money with explicit instructions on what to buy. I called to follow up and find out they had botched up the trades. They couldn't even locate 5000.00 of my money! I asked that they cancel everything since it was all wrong but they told me they couldn't do it. I am soo mad so I told them to sell it all and send me a check. Still waiting for that check.

I can't stand people who don't give you a straight answer. I have been a long time vanguard supporter but I think I will move on -

VALLEY FORGE, PA, August 1, 2008 – The Board of Directors of The Vanguard
Group has elected F. William McNabb III as Chief Executive Officer of Vanguard,
effective August 31. Under the transition plan announced in February, Mr. McNabb
will succeed John J. Brennan, who has served as Vanguard CEO since 1996.

2008 Aug 09 10:51 AM