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Zach Tripp
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Certified program manager (PMP) with a background in engineering. Fundamental investor who's portfolio consists of buy-and-hold dividend growth companies, growth companies (short-term) and index fund portfolio management (retirement / long-term savings).
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  • Vanguard ETF Expense Ratios Increase Due To Business Development Companies (BDCs) 0 comments
    Feb 15, 2012 11:35 PM | about stocks: IVOV, IVOO, VIOO, VIOV, VONV
    Some interesting news from Vanguard. I guess investing in BDCs is getting more popular...

    Expense ratio changes for 27 Vanguard ETFs®
    From Vanguard, 20-Jan-2012

    In December 2011, Vanguard filed annual prospectus updates for 27 ETFs that had changes in their stated expense ratios. Eight of the ETFs had expense ratios that increased, while the remaining 19 ETFs had a decrease. Ten sector, six bond, and three mega-cap ETFs experienced reductions. Increases occurred in eight of our Russell and S&P domestic equity ETFs.

    In the cases where there were expense ratio reductions, they were primarily a result of the way we operate our funds. When funds and their corresponding ETF share class experience greater efficiencies (either through asset growth, operating cost reductions, or a combination of both) the savings are passed on to the fund owners in the form of lower expenses.

    For those ETFs where expense ratios increased, it was due to "acquired fund fees and expenses" (AFFE) that result from ownership of business development companies (BDCs).

    Although the SEC requires that BDC costs be included in a fund's expense ratio, these fees are not incurred by the fund. They have no impact on a fund's total return or on its tracking error relative to an index. The financial statements in each fund's annual or semiannual report provide an annualized calculation of the fund's actual expenses for the period, a more accurate tally of the operating costs incurred by shareholders. Several Vanguard ETFs own shares of BDCs because the BDCs are included in the ETFs' target indexes.

    As always, Vanguard continues to work hard to create value for our clients by offering hiqh-quality investments with low costs. The chart below identifies the ETFs that were affected along with their prior and current expense ratios. All of the ETFs below have fiscal years ending in August. As prospectuses are updated for other funds, there may be additional expense ratio changes.

    Vanguard ETF®Ticker
    expense ratio
    expense ratio
    S&P Mid-Cap 400IVOO0.16%0.17%
    S&P Mid-Cap 400 ValueIVOV0.210.24
    S&P Small-Cap 600VIOO0.150.16
    S&P Small-Cap 600 ValueVIOV0.200.22
    Russell 1000 ValueVONV0.150.16
    Russell 2000VTWO0.190.22
    Russell 2000 ValueVTWV0.270.33
    Russell 3000VTHR0.150.16
    Mega Cap 300MGC0.130.12
    Mega Cap 300 GrowthMGK0.130.12
    Mega Cap 300 ValueMGV0.130.12
    Short-Term Corporate BondVCSH0.150.14
    Short-Term Government BondVGSH0.150.14
    Intermediate-Term Corporate BondVCIT0.150.14
    Intermediate-Term Government BondVGIT0.150.14
    Long-Term Corporate BondVCLT0.150.14
    Long-Term Government BondVGLT0.150.14
    Consumer DiscretionaryVCR0.240.19
    Consumer StaplesVDC0.240.19
    Health CareVHT0.240.19
    Information TechnologyVGT0.240.19
    Telecommunication ServicesVOX0.240.19

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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