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By Christine Benz and Dan Culloton | 10-11-2012 11:00 AM

3 Things to Watch Following Vanguard's Index Swap

Investors should keep tabs on a few key indicators as Vanguard switches the benchmarks for 22 of its index funds.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com.

Vanguard recently announced that it plans to switch the benchmarks for 22 of its index funds. Joining me to share his insights into the switch is Dan Culloton. He is associate director of fund analysis for Morningstar.

Dan, thank you so much for being here.

Dan Culloton: Thanks for having me.

Benz: So, Dan, 22 funds here; let's discuss the biggest funds that are going to be affected by the switch.

Culloton: The biggest funds that are getting new indexes are the Vanguard Total Stock Market Index and the Vanguard Emerging Markets Index. The Vanguard Emerging Markets Index will be getting a FTSE Emerging Markets Index going forward, and Vanguard Total Stock Market will go from the MSCI Broad Market Index to the CRSP version of the Total Market Index.

Benz: Vanguard is already using FTSE for a number of its index funds already. CRSP is a new name to Vanguard investors. Let's talk about what CRSP is and also how its methodologies might differ from Vanguard's existing index providers?

Culloton: CRSP may be a new name to retail investors and maybe some advisors and institutions out there, but in academic finance, it's not a new name at all. It's been around since 1960, doing research into security prices, and it's housed at the University of Chicago Booth School of Business. So, people who have been doing research into indexes and into the markets are very familiar with the name. They got into the indexing business in 2009 actually with the help of Vanguard with some financial backing from them.

Benz: How about CRSP's methodology, Dan? How does that differ some of Vanguard's existing providers?

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