Updated with correction, Sept. 28, 2010
Vanguard Group is restructuring some of its target-date funds, reducing the number of international stock funds available to investors but raising the overall international equity exposure.
In the new construction for all 12 Target Retirement funds, the Vanguard Total International Stock Index Fund will replace the Vanguard European Stock Index, Pacific Stock Index and Emerging Markets Stock Index funds, according to a news release. They will keep the Vanguard Total Stock Market Index and Total Bond Market II Index funds.
Four of the 12 Target Retirement Funds will invest in the three broad index funds, as well as the Vanguard Inflation-Protected Securities Fund (Vanguard Target Retirement 2005 and 2015 Funds) and Vanguard Prime Money Market Fund (Vanguard Target Retirement 2005 Fund and Target Retirement Income Fund).
“We believe that the funds’ shareholders will realize numerous benefits by the move to the Total International Stock Index Fund, including more streamlined portfolio construction and more diversified international exposure,” Vanguard Chief Investment Officer George U. “Gus” Sauter said in the Vanguard news release.
Vanguard also will raise its international equity exposure for all target-date funds as well as its LifeStrategy Funds and the Vanguard STAR Fund to about 30% from 20%. The bond component won’t be affected, the news release said.
For example, Vanguard’s 2025 Target Retirement Fund currently has an asset mix of 60% domestic equity, 25% bonds and 15% international equity. Under the new formula, the asset mix be 52% domestic equity, 25% bonds and 23% international equity.
“This increased international allocation will incrementally increase diversification and hence, marginally reduce the volatility of the funds over the long term,” Mr. Sauter said in the news release.