Vanguard closes Wellington Fund to many new accounts

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Ever Ready
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Vanguard closes Wellington Fund to many new accounts

Post by Ever Ready »

Vanguard Group said on Thursday it would stop opening new accounts from financial advisers and institutional customers in its popular $68 billion Wellington Fund, which invests in a mix of stocks and bonds. All current investors can continue to add money to the fund and retail investors will be permitted to open new accounts, Vanguard said.

http://www.reuters.com/article/2013/02/ ... A420130228
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WolfpackFan
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Re: Vanguard closes Wellington Fund to many new accounts

Post by WolfpackFan »

Why does Vanguard close funds as they become more popular? Thanks in advance.
sport
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Re: Vanguard closes Wellington Fund to many new accounts

Post by sport »

WolfpackFan wrote:Why does Vanguard close funds as they become more popular? Thanks in advance.
A managed fund has some favored companies/bonds that it likes to invest in at any particular time. If the fund has inflows that are too large, they start to run out of good investment opportunities for that money, or they cannot invest in their "favorites" without driving up the prices. This is detrimental to the performance of the fund, and is not fair to existing shareholders.
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EDN
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Re: Vanguard closes Wellington Fund to many new accounts

Post by EDN »

I didn't read the press release, but for some reason the Intermediate Muni fund is closing too, according to my Vanguard rep. Baird has a better muni fund anyway, so its not a big deal, just passing that along.

Eric
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SpringMan
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Re: Vanguard closes Wellington Fund to many new accounts

Post by SpringMan »

Retail investors will still be permitted to open new positions in Wellington. Most of us are retail investors. Same for VG Intermediate Tax Exempt bond fund.
Best Wishes, SpringMan
Dandy
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Re: Vanguard closes Wellington Fund to many new accounts

Post by Dandy »

Any fund that is closed to new investors usually means the portfolio manager is signaling it can't find enough good investments for its investment philosophy. Vanguard is dong the responsible thing. Most funds just keep raking in the $$ as long as they can and usually keep open 401k investments open and close out retail. I don't own Wellington but I would avoid it now. This is one reason to avoid successful, large non index funds.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by DavidC »

In case you'd rather have a link to Vanguard's article instead here you go.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by chipmonk »

EDN wrote:I didn't read the press release, but for some reason the Intermediate Muni fund is closing too, according to my Vanguard rep. Baird has a better muni fund anyway, so its not a big deal, just passing that along.
I assume that they must be semi-closing the muni fund because too many yield-chasing investors are buying right now, and they're running out of high-quality munis to invest in :o

Right now, munis are yielding HIGHER than treasuries, despite the exemption from federal income tax which usually allows their issuers to offer LOWER yield...
Last edited by chipmonk on Fri Mar 01, 2013 9:24 pm, edited 1 time in total.
Timcom99
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Re: Vanguard closes Wellington Fund to many new accounts

Post by Timcom99 »

jsl11 wrote:
WolfpackFan wrote:Why does Vanguard close funds as they become more popular? Thanks in advance.
A managed fund has some favored companies/bonds that it likes to invest in at any particular time. If the fund has inflows that are too large, they start to run out of good investment opportunities for that money, or they cannot invest in their "favorites" without driving up the prices. This is detrimental to the performance of the fund, and is not fair to existing shareholders.
Jeff
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linenfort
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Re: Vanguard closes Wellington Fund to many new accounts

Post by linenfort »

Dandy wrote:...
I don't own Wellington but I would avoid it now.
...
I own the other one mentioned in the article. Intermediate-term tax exempt.
Should I be bailing on that?
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Re: Vanguard closes Wellington Fund to many new accounts

Post by cinghiale »

linenfort asked,
I own the other one mentioned in the article. Intermediate-term tax exempt.
Should I be bailing on that?
In a word, no. There are lots of good reasons for holding this fund, especially in taxable accounts. Those reasons haven't changed.
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robertalpert
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Re: Vanguard closes Wellington Fund to many new accounts

Post by robertalpert »

Does this imply that Wellington (will at some point in the future) become closed to all new investors (even new investors with accounts at Vanguard)?

Have other closed funds followed that sequence of first (initially) being closed to investors at other brokerages? Does anyone know --- did it progress this same way at Vanguard with their other currently closed funds? {eg prime-cap, capital-opportunity, high-yield-corporate}
bogle2013
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Re: Vanguard closes Wellington Fund to many new accounts

Post by bogle2013 »

This might be a naive question - but is the price of the fund based upon the performance of the assets it owns or the buy/sell activity of the fund on the open market, or both??
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Re: Vanguard closes Wellington Fund to many new accounts

Post by z3r0c00l »

Wow just a week after I buy inter muni... Creepy!
Last edited by z3r0c00l on Sun Mar 03, 2013 6:29 am, edited 1 time in total.
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wilked
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Re: Vanguard closes Wellington Fund to many new accounts

Post by wilked »

z3r0c00l wrote:Wow just a weak after I buy inter muni... Creepy!
You know, the most amazing thing happened to me tonight. I was coming here, on the way to the lecture, and I came in through the parking lot. And you won't believe what happened. I saw a car with the license plate ARW 357. Can you imagine? Of all the millions of license plates in the state, what was the chance that I would see that particular one tonight? Amazing!
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Re: Vanguard closes Wellington Fund to many new accounts

Post by nisiprius »

bogle2013 wrote:This might be a naive question - but is the price of the fund based upon the performance of the assets it owns or the buy/sell activity of the fund on the open market, or both??
The price of a mutual fund is based on the market price of the assets it owns. When you submit an order to buy or sell the fund, the order is executed according to the NAV of the assets in the fund at close of day. The market determines the prices of the assets that are held by the fund; the market play a role in pricing the shares themselves. The shares themselves are not auctioned, not traded in the market. In effect, a mutual fund has an ongoing contract to buy or sell fund shares based on the market prices of its holdings at close fo day.

The price of an ETF is based on auction trading of the actual shares of the ETF itself. They are worth what they will fetch at auction. The NAV of your shares may calculated to be $50, and logically someone ought to be willing to buy your shares for $50, but if nobody want to, you might have to take $49.96 for them. Or, if you are lucky, and that ETF is in demand, you might get $50.03 for them. The market value of the whole can be different from the sum of the market values of its parts.

Wellington is not an ETF and its shares are not auctioned.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by jjunk »

I'm curious how owners of Wellington feel about this move? Are you holding, selling or allocating new funds?
investor
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Re: Vanguard closes Wellington Fund to many new accounts

Post by investor »

holding on

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Levett
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Re: Vanguard closes Wellington Fund to many new accounts

Post by Levett »

"I'm curious how owners of Wellington feel about this move? Are you holding, selling or allocating new funds?"

I am doing nothing. The fund has closed before and it had no discernible negative impact on my investment.

And why would I think of selling a fund that acts in my best interests?

The last thing the fund needs is asset bloat and hot money.

Lev

P.S. I feel precisely the same way about Intermediate-Term Tax-Exempt. I don't recall it closing before, though, but perhaps it has.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by Dandy »

I would be careful about owning or adding to any fund that signals it is closing off new investments - There are not many VG options to Intermediate Tax exempt fund if you want to hold bonds in a taxable VG acct. The fact that the fund can purchase muni bonds from all states may give it more options than a state specific fund but I'm not thrilled with owning it now that it is limiting new investments. It is not a time to panic but a time for at least thinking of options and watchful waiting.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by trudy »

jjunk wrote:I'm curious how owners of Wellington feel about this move? Are you holding, selling or allocating new funds?
I've occasionally over the years owned a fund that closed to new investors. I have not sold in those cases, and even added to my investment if I felt it was a good fund. The managers are being responsible.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by Dandy »

VG and the managers are being responsible. That doesn't mean that the fund is in a good position. What the responsible managers are saying is that they are not comfortable with the inflow of investments given the size of the fund. That usually means they are currently close to being out of their best investment ideas and don't want to get into buying their B and C choices. That is a signal that investors shouldn't ignore -- don't panic, maybe don't sell but maybe don't consider adding anything significant. With equity/balanced funds their are many other VG funds that should be considered.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by stevewolfe »

The question is though, which investment ideas are they out of? E.g., Value stocks, intermediate term corporate bonds or both (although it does hold a 10% international stake). Would be interesting to know where they are concerned about not finding attractive options..
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Re: Vanguard closes Wellington Fund to many new accounts

Post by 3247 »

I have held (and added to) an investment in the Wellington Fund since the late 80's and can say it has closed a number of times since then. I have not seen, or experienced, anything with this fund during my ownership that would give me cause to be concerned. I can say that I personally don't see any reason to avoid the fund, particularly if you are a long term type investor.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by jjunk »

Appreciate the reply's. I was personally curious as I'm 50/50 Wellington/Wellesley in my taxable accounts and continue to buy into Wellington as needed to keep my allocations proper. I was curious what others were/are doing with their allocations.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by LynnC »

I am staying the Wellington course. also. I like the fund and am holding long term.

LynnC
maj
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Re: Vanguard closes Wellington Fund to many new accounts

Post by maj »

Vanguard closes its funds for the sake of the owners--we are the owners
Vanguard's fiduciary responsibility is to current owners, not potential future owners

This may be why Wall Street has called John Bogle a communist and a socialist---owners not profits come first.

peace
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Re: Vanguard closes Wellington Fund to many new accounts

Post by EternalOptimist »

Holding on....bought more last week.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by Dandy »

vanguard doing the proper thing in trying to trim asset inflows if the portfolio management feels the fund is getting too large. Many fund companies keep taking money in well beyond that point and that usually hurts long time fund holders but boosts profits, at least temporarily.
I would still be somewhat wary of any fund that closes off inflows, even partial inflows. I'm sure Wellington still will have substantial inflows from existing holders. I would begin to at least look for suitable alternatives in case Wellington doesn't maintain its enviable track record.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by mike143 »

I always get Wellington and Wellesley confused.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by travellight »

lol, mike.... me too. Hate to admit it, especially in this crowd.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by lindisfarne »

wilked wrote:
You know, the most amazing thing happened to me tonight. I was coming here, on the way to the lecture, and I came in through the parking lot. And you won't believe what happened. I saw a car with the license plate ARW 357. Can you imagine? Of all the millions of license plates in the state, what was the chance that I would see that particular one tonight? Amazing!
- Feynman
I'd heard the Feynman example but didn't associate it with him. (Is this from one of his books? Which one? I've read them all but don't remember!)
B. Wellington
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Re: Vanguard closes Wellington Fund to many new accounts

Post by B. Wellington »

jjunk wrote:I'm curious how owners of Wellington feel about this move? Are you holding, selling or allocating new funds?
I'm holding and sticking with my I.P.S. To change anything this late in our investing career would be unwise.

We have been with Wellington for many, many years. Most of it in Roth I.R.A.'s Our mix of funds fit our risk profiles. (Index and managed.) And if anything happens to me, the spouse doesn't have to worry about "adjusting" anything.

B.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by wilked »

lindisfarne wrote:
wilked wrote:
You know, the most amazing thing happened to me tonight. I was coming here, on the way to the lecture, and I came in through the parking lot. And you won't believe what happened. I saw a car with the license plate ARW 357. Can you imagine? Of all the millions of license plates in the state, what was the chance that I would see that particular one tonight? Amazing!
- Feynman
I'd heard the Feynman example but didn't associate it with him. (Is this from one of his books? Which one? I've read them all but don't remember!)
I am pretty sure I first read it in here
http://www.amazon.com/Surely-Feynman-Ad ... 0393316041
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Re: Vanguard closes Wellington Fund to many new accounts

Post by abuss368 »

Vanguard does this as needed with their active funds to better control cash inflows.

Question - has this ever been done with an index fund? I would think not as one does not invest in the index but rather Vanguard buys the securities in the index. If anyone can shed any light, that would be appreciated.

Thanks.
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Re: Vanguard closes Wellington Fund to many new accounts

Post by bertilak »

mike143 wrote:I always get Wellington and Wellesley confused.
So go 50-50 and forget about it!
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