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Vanguard Emerging Markets Fund and ETF begin transition to new FTSE Index


The Vanguard Emerging Markets Stock Index Fund, including Vanguard MSCI Emerging Markets ETF, have begun tracking the FTSE Emerging Transition Index as an interim step toward ultimately tracking the FTSE Emerging Index.

In connection with the index change, the name of the fund’s ETF share class will change from Vanguard MSCI Emerging Markets ETF to Vanguard FTSE Emerging Markets ETF. The ETF’s ticker symbol (VWO) will not change.

The Emerging Markets Stock Index Fund has USD76bn in assets, making it the largest fund in its category. VWO, a share class of the fund, has USD60bn in assets and was the top-selling emerging markets ETF in the US in 2012.

The FTSE Emerging Index is a market capitalisation-weighted index that provides comprehensive coverage of emerging markets. Vanguard has entered into long-term agreements with FTSE that are expected to provide cost certainty and savings over time for investors.

The index offers comprehensive and diversified exposure to 22 emerging market countries, including Brazil, Russia, India, and China. It is generally comparable to the fund’s prior benchmark. The most notable difference between FTSE and MSCI’s international indexes is that FTSE classifies South Korea as a developed market, making it necessary for the Emerging Markets Stock Index Fund to gradually sell down its South Korean exposure and invest the proceeds in the other markets in the index.

To minimise market impact during the transition, the Emerging Markets Stock Index Fund will follow the FTSE Emerging Transition Index for approximately six months. This extended transition will reduce the costs associated with trading large amounts of securities in a short period. To provide transparency to shareholders during the transition, FTSE will supply weekly updates of the transition index’s composition.

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