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Vanguard Institutional Target Retirement Funds now available


Vanguard Institutional Target Retirement Funds, featuring expense ratios of 0.10 per cent, are now available to investors. 

The minimum initial investment for the 12 new funds is USD100 million in aggregate across the entire suite of Target Retirement Funds for investment-only clients; there is no minimum for Vanguard recordkeeping clients. 

According to the recently released report How America Saves 2015, the popularity of target-date funds continues to grow, driven in large part by 401(k) defined contribution (DC) plans and the use of target-date funds as the default investment strategy for participants. At the end of 2014, with 88 per cent of Vanguard plan sponsors offering target-date funds, nearly all Vanguard participants had access to this option and nearly two-thirds use target-date funds. Moreover, last year 76 per cent of new plan entrants invested solely in a target-date fund, and USD4 of every USD10 deposited in Vanguard plans was invested in target-date funds. 

“Target-date funds are, without question, one of the most important elements of the 401(k) revolution. As defined contribution plans evolved, it became clear that many workers were not going to be their own investment manager,” said Martha King, Managing Director and head of Vanguard’s Institutional Investor Group. “They either lack time, willingness, or ability. TDFs offer built in advice in a single low-cost vehicle.” 

The new funds will broaden access to institutionally priced Target Retirement offerings for 401(k) retirement plans, as well as 403(b)(7) and other types of retirement plans. Earlier this year, Vanguard announced plans to further diversify its all-in-one funds by increasing the international equity and fixed income exposure. The new Institutional TRFs will launch with the new target asset allocation. 

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date. 

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