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Vanguard Again Slows Inflows at Capital Opportunity

Gold-rated Vanguard Capital Opportunity is closing to new investors, apart from those enrolled in Vanguard Flagship Services or Vanguard Asset Management Services. Separately, MFS and Vanguard roll out low-vol funds, and American Century Appoints 2 Co-CIOs.

Morningstar Fund Analysts, 12/12/2013

On Dec. 9, Vanguard announced that the Gold-rated, $11.5 billion Vanguard Capital Opportunity VHCOX is closing to new investors, except those enrolled in Vanguard Flagship Services or Vanguard Asset Management Services, and that the firm is reinstating a $25,000 annual limit for new purchases by existing shareholders. These moves come just eight months after Vanguard reopened the fund to new individual investors and removed the annual limit on purchases, the first time since 2004 that Vanguard had made the fund available to newcomers. The Capital Opportunity fund has been managed since 1998 by the Primecap team, which has achieved one of the fund industry's best long-term records with Vanguard Primecap VPMCX, which has been closed since 2009 along with sibling Vanguard Primecap Core VPCCX. Capital Opportunity saw $862 million in net inflows in the first 11 months of 2013, helped by a great year in which it has gained more than 35% and ranked near the top of the large-growth category.

Sequoia to Slow Inflows Further
Check out our special Fund Times article from Tuesday, Dec. 10 regarding Gold-rated Sequoia Fund SEQUX. Effective immediately, the fund has closed entirely to new investors. This follows a soft close that the fund instituted in January 2012.

Vanguard Rolls Out Global Minimum Volatility Fund
On Thursday, Dec. 12, Vanguard launched a new actively managed fund, Vanguard Global Minimum Volatility VMVFX, which will invest in stocks around the globe. The fund has two share classes, Investor and Admiral, with expense ratios of 0.30% and 0.20%, respectively.

Vanguard had been considering low-volatility options for at least three years. Unlike existing offerings in the low-volatility exchange-traded fund space, however, Vanguard's fund is actively managed as opposed to passively managed--somewhat surprising considering Vanguard's dominance and expertise in index funds. The fund isn't subadvised, either, as many of the firm's actively managed funds are. Instead, it will be run by the firm's quantitative team, the active equity group, which is now under fairly new leadership in John Ameriks. Ameriks, who assumed his current post in early 2013, is a Vanguard veteran and was instrumental in designing Vanguard's target-date funds and endowmentlike managed-payout funds. The new fund's managers are James Troyer, James Stetler, and Michael Roach.

This fund will look to invest in names that have exhibited lower volatility relative to other stocks in the FTSE Global All-Cap Index (USD Hedged). It also will consider correlations among stocks when constructing the portfolio. The FTSE Global All-Cap Index includes emerging markets, which can be volatile in and of themselves, but which also can provide diversification benefits and potentially reduce a broad portfolio's volatility over the long haul. The managers will hedge most of the portfolio's currency exposure; doing so can have a meaningful impact on a fund's volatility (and performance relative to actively managed global-equity peers). Although the fund will be actively managed, Vanguard's active equity group typically aims for returns that are highly correlated with designated benchmarks.

MFS Rolls Out Low-Volatility Funds
MFS made its first foray into low-volatility investing this month, launching MFS Low Volatility Equity MLVAX and MFS Low Volatility Global Equity MVGAX. The former will target a volatility level that is 20% lower than that of the S&P 500 Index over a full market cycle, while the latter will target 30% less volatility than the MSCI All Country World Index. Market gyrations in recent years have many investors looking for such lower-volatility options, and multiple fund companies have responded with similar products.

The two new MFS funds are managed by the firm's blended research team, which combines stock rankings from the firm's analysts with a quantitative model to fit a certain goal, such as dividend yields or low volatility (as in these two funds' case). This team has been gaining prominence at the firm, having taken over a sleeve of moderate-allocation fund MFS Total Return MSFRX in April 2013.

American Century Appoints Co-CIOs
At American Century, two chief investment officers will take the place of one.

Morningstar fund analysts cover more than 1,700 mutual funds and write regular commentary covering fund industry news, fund investing trends, picks, portfolio planning, international investing, and more.

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