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Morningstar has reported that Vanguard has filed "...an exemptive relief application with the SEC seeking the OK to launch an absolute return fund..."
I won't rehash Morningstar's article for you, but it's worth a read if you are a Vanguard investor�-- or so-called "Bogle Head." �I have a mixed reaction to the possibility of the new fund (which would use traditional securities such as stocks and bonds, but which could also venture into futures contracts, currencies and other derivatives and non-traditional mutual fund strategies).�
My initial reaction (particularly due to Morningstar's headline mentioning "Vanguard" and "hedge fund" in the same sentence) was that Vanguard filed for the fund as pressure to introduce sexier products to its mix of passively and actively managed funds (I tend to like the ho-hum, conservative fund strategies).
Maybe they were chasing hot dollars that might migrate from the traditional relative return products to absolute return products; maybe Vanguard was attempting to broaden their investor base to more aggressive investors.�
After putting Morningstar's article aside, I decided to read Vanguard's exemptive relief application. Here comes the mixed reaction (the application didn't necessarily offer new information that Morningstar didn't report, but going straight to the source is always helpful). It appears Vanguard is brainstorming on how to build (and improve upon existing products) a more "endowment-like" strategy that may solve the income needs of retirees�-- which is not only a huge market opportunity for fund companies, but a much needed product for investors.
�In other words, Vanguard is looking to add an additional strategy to their already existing Managed Payout Funds (look for more coverage on this product in a future article and blog post). This hedge fund we are mentioning would be owned across the three Managed Payout Funds (up to 20% of the Managed Payout Funds) as |
