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Vanguard Slashes Minimum Investments on 27 Funds

Target Retirement minimums fall to $1,000; Primecap-run fund minimums also drop, but funds stay closed for now.

Dan Culloton, 05/10/2011

Vanguard has lowered the minimum initial investments for nearly 30 of its more popular funds, including its 12 Target Retirement funds and the equity funds subadvised by Primecap Management, according to Securities and Exchange Commission filings made Tuesday. The full list of the funds and their new minimums, which go into effect immediately, is in the table below.

The decision to lower the minimums for Vanguard Primecap VPMCX, Primecap Core VPCCX, and Capital Opportunity VHCOX is curious because the funds remain closed to new investors. In an e-mail response to questions, Vanguard said it lowered the required up-front investments for the Primecap funds just in case it decided to reopen the offerings in the future, though it did not say if or when that might happen.

Capital Opportunity's and Primecap's minimum initial investments drop from $25,000 to $3,000. Primecap Core's falls from $10,000 to $3,000. The Primecap-run funds will keep their maximum annual investments of $25,000, though.

Vanguard said it's standardizing its minimum investment levels for the investor share classes of most of its funds at $3,000. In years past, the family has raised and lowered minimums on funds to control asset flows in and out of the funds. Vanguard Health Care VGHCX, which gets a $3,000 minimum now, has had a $25,000 initial requirement since late 2000. Some of the firm's largest and best offerings, including Vanguard Wellington VWELX and Vanguard Windsor II VWNFX, now have lower minimums.

The Target Retirement funds' minimum initial investments drop even lower, from $3,000 to $1,000. Up to now, only Vanguard STAR VGSTX, a fund of actively managed Vanguard funds, has offered so low a hurdle for new investors. Vanguard CEO Bill McNabb said in a statement scheduled to be released Wednesday that he hopes the lower barriers to entry on the target date funds encourage retirement savings. "By reducing the investment requirements on our target date funds, we hope to encourage more individuals to participate in the financial markets," McNabb said.

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