Vanguard proposes index fund mergers

Vanguard Group plans to merge two institutional index funds into other Vanguard offerings with similar objectives, while adding an institutional share class to the surviving funds.

The $3.7 billion Vanguard Institutional Total Bond Market Index fund will be merged into the $61.3 billion Vanguard Total Bond Market Index fund, and the $5 billion Vanguard Institutional Developed Markets Index fund will be merged into the $2.8 billion Vanguard Developed Markets Index fund.

The move will result in greater efficiencies that could lead to lower expense ratios over time, CIO Gus Sauter said in a news release.

Shareholders of the funds slated to be merged will vote on the proposed changes on Feb. 3, 2010. If approved, the mergers should occur in early February, the news release said.