Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
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I first invested in Vanguard Healthcare Fund Admiral in 2005 back when the expense ratio was 0.18%. It has gone up significantly in 13 years and is now 0.33%. During that time the assets have grown by 4X. Also during that time, the return has slightly beaten the S&P1500 Health Care TR benchmark by 0.13%/year according to Morningstar. I don't understand why the cost is so much higher now. Clearly performance is not deserving of a performance bonus. Size has grown so the cost of administering the fund should have gone down; moreover, the Admiral fund has a $50K minimum. I also don't understand why the difference between the Investor and Admiral class expense ratios is only 5 basis points (15%). Other funds have a bigger ratio between class expense ratios. Vanguard phone reps are unable to explain the expense ratio rise.
dont know. dont care. either it fits your plan or it doesnt.
My speculation is that as funds grow it IS more difficult to actively manage a mutual fund. Actively managed funds from what I can tell don't necessarily adhere to the same expense ratio rules and expectations as index funds. That being 'the more funds the lower the ER.' Sometimes they go up.
Maybe the evaluation is based on risk-adjusted return rather than just return. I don't really follow how Vanguard prices the actively managed funds like this.
Have you considered switching to the Vanguard Health Care Index Fund? There are Admiral Shares at $100,000 minimum (VHCIX) or ETF shares (VHT). Both cost 10 bp. I see no reason to expect active managers to add value in large, liquid health care stocks.
Unfortunately, some of us have signifcant embedded taxable gains in VGHAX . Even though it's not particularly tax efficient.
This seems like a reasonable question. I believe that historically the fund has had considerable foreign holdings so that could be a factor in performance vs. the benchmark, and possibly in manager compensation.