Vanguard has filed for exemptive relief for the firm's Managed Payout Funds to be able to invest up to 20% of assets in the newly established Vanguard Alternate Strategies Fund. Here is the filing.
The Alternative Strategies Fund is a sub-fund of an umbrella fund5 known as Vanguard Investments Select Series I, PLC, which is organized in Ireland as a limited liability Variable Capital Corporation (“VCC”), a type of Irish investment company. Because the Alternative Strategies Fund uses non-traditional strategies and instruments, it has been established as a VCC that is a Qualified Investment Fund (commonly known as a “QIF”), a type of fund available only to high net worth individuals and institutional investors. The fund will be regulated by the Irish Financial Services Regulatory Authority (the “FSR”) and will comply with Irish securities and other applicable laws.
The Alternative Strategies Fund is expected to employ multiple strategies,6 each of which will seek to produce investment returns that have two key characteristics: (1) performance over the long term comparable to, but independent of the direction and timing of, U.S. stock returns; and (2) volatility that is similar in magnitude to the historic volatility of the U.S. stock market. To the extent that a strategy contemplated for use in the Alternative Strategies Fund is expected to exhibit lower volatility than the historic volatility of the U.S. stock market, the Alternative Strategies Fund will use leverage to adjust the volatility and expected returns of these investments to targeted levels. Some of the Alternative Strategies Fund’s strategies may be designed to capture risk premiums through investment opportunities arising from the structure, pricing, liquidity, volatility, or other features of the financial markets. The fund may employ other strategies designed to take advantage of relative value differences perceived among securities or across the financial markets.
5 An umbrella fund is the Irish equivalent of a registrant and a sub-fund is the equivalent of a fund that is a series of the registrant.
6 The number of strategies will vary over time. Currently, there are six strategies, although one is temporarily inactive. VGI likely will add strategies over time to promote diversification.
The Alternative Strategies Fund’s strategies may be implemented through direct or indirect investments in stocks, bonds, hybrid securities, commodities, futures contracts, currencies, and other asset classes or investments. The fund may employ leverage, derivatives, short sales, and other complex investment techniques or transactions.