Vanguard Group is changing the allocation of its target-date and target-risk funds by raising its international equity and international bond components, the company said Thursday.
Vanguard spokeswoman Emily White said the change in allocation is expected to be completed by the end of the year.
For each of its funds, Vanguard will raise the international stock component to 40% from 30% of total equity. And it will raise the international bond component to 30% from 20% of total bonds.
For example, Vanguard’s 2060 Target Retirement Fund now has an allocation of 63% domestic equity and 27% international equity for an aggregate 90% allocation. Under the new allocation, the international equity component will be 36% and the domestic equity component will be 54%.
“International holdings are a valuable diversifier in a balanced portfolio, giving shareholders exposure to return streams that don’t move in lockstep with the U.S. markets,” said Mortimer J. “Tim” Buckley, a managing director and chief investment officer, in a news release. “We carefully debate the merits of proposed changes to our target retirement funds and other funds of funds, and make them when deemed to be in the best, long-term interests of our clients.”
Vanguard also announced it will add a new target-date series consisting of 12 funds for plans sponsors with aggregate assets of $100 million or more. The cost basis for each of the funds is estimated at 10 basis points, Ms. White said, and the new series is expected to be available by the end of the second quarter.
Vanguard’s current target-date series, also with 12 funds, has expense ratios ranging from 16 to 18 basis points. These expenses “are not expected to change” when the asset allocations are adjusted, the news release said.