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Volatility

Vanguard launches actively-managed global minimum volatility fund

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Vanguard has launched the Vanguard Global Minimum Volatility Fund, which offers two low-cost share classes – Investor Shares and Admiral Shares.

The new actively managed equity fund seeks to provide long-term capital appreciation with lower volatility relative to the global equity markets.
 
Unlike a traditional active fund that seeks to outperform the market on an absolute basis, this fund is constructed to offer broad market exposure with a lower degree of share price fluctuations.
 
Vanguard expects the fund to appeal to investors seeking to lower the volatility of the equity portion of a well-diversified, balanced portfolio.
 
“Vanguard Global Minimum Volatility Fund features the traditional characteristics of Vanguard funds – low cost, diversification, and a disciplined approach. To be clear, however, the new offering will experience some level of volatility and periods of return variance, potentially considerable, from the broad market, along with the risks generally associated with global equity investing,” says Vanguard chief investment officer Tim Buckley.
 
Vanguard’s equity investment group will be the sole manager of the fund.
 
The advisor will employ quantitative models to evaluate the securities in the fund’s benchmark, the FTSE Global All-Cap Index (USD Hedged), in order to construct a global equity portfolio that seeks to achieve the lowest amount of expected volatility subject to a set of reasonable constraints designed to foster portfolio diversification and liquidity. The fund is expected to invest approximately half of its assets in foreign company stocks and approximately half of its assets in US company stocks, and to use forward currency contracts to hedge most of its non-US positions to the US dollar.
 
The fund’s Investor Shares will have an estimated expense ratio of 0.30 per cent and require a minimum initial investment of USD3,000, and the Admiral Shares will have an estimated expense ratio of 0.20 per cent and require a minimum initial investment of USD50,000. 

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