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Vanguard launches small-cap index fund covering developed and emerging markets


Vanguard’s new international small-cap index fund, Vanguard FTSE All-World ex-US Small-Cap Index Fund, has implemented its long-term investment strategy following the completion for pur

Vanguard’s new international small-cap index fund, Vanguard FTSE All-World ex-US Small-Cap Index Fund, has implemented its long-term investment strategy following the completion for purchase.

A two-week subscription period begins today and is expected to end on 2 April.

The fund offers investor shares, with an estimated expense ratio of 0.60 per cent, and institutional shares, with an estimated expense ratio of 0.35 per cent. The fund’s ETF shares will launch at the conclusion of the subscription period and will have an estimated expense ratio of 0.38 per cent.

The new fund seeks to track the investment performance of the FTSE Global Small Cap ex US Index, a benchmark of approximately 3,300 stocks of companies located in 47 countries. According to Lipper, it is the only US-domiciled international index fund to offer exposure to small-cap stocks of both developed and emerging markets outside the US in a single portfolio.

‘Vanguard continues to broaden its stable of international index offerings, and this new small-cap fund will complement our array of broad-market, large-cap-oriented international index funds,’ says Vanguard chief investment officer Gus Sauter (pictured). ‘Investors and financial advisers will be able to employ this new fund to gain broadly diversified, low-cost exposure to international small-cap stocks.’

According to a recent paper published by Vanguard’s Investment Counselling & Research group titled ‘The Global Recession and International Investing,’ the long-term diversification benefits associated with international investing remain strong, despite the spillover to the global economy from the current US recession.

While future performance can never be guaranteed, the study finds that the benefits of international stocks as a diversifier should become most apparent when the stock market volatility abates and the global financial crisis eventually passes, at which time differences in the economic and financial market performance of the US and other countries should emerge.
The minimum initial investment requirement for Vanguard FTSE All-World ex-US Small-Cap Index Fund is USD3,000 for investor shares and USD5m for institutional shares. There will be a 0.75 per cent fee on purchases and redemptions of the investor and institutional shares to help defray the transaction costs associated with buying and selling foreign securities. The purchase and redemption fees do not apply while the subscription period is in effect.
The launch brings the number of Vanguard’s ETFs to 39, with aggregate assets topping USD44bn.

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