Vanguard Announces Plans to Launch Commodities Fund

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
MFInvestor
Posts: 114
Joined: Mon May 02, 2016 7:28 pm

Vanguard Announces Plans to Launch Commodities Fund

Post by MFInvestor » Thu Apr 04, 2019 9:31 am

Vanguard Announces Plans to Launch Commodities Fund

https://www.prnewswire.com/news-release ... 24779.html

Where have you gone, Jack Bogle
A nation turns its lonely eyes to you

VALLEY FORGE, Pa., April 4, 2019 /PRNewswire/ -- Vanguard today filed a preliminary registration statement with the Securities and Exchange Commission for Vanguard Commodity Strategy Fund. The new actively-managed fund, which is expected to launch in June 2019, will offer investors added portfolio diversification, along with a potential hedge against inflation risk by investing primarily in commodities and treasury inflation protected securities (TIPS).

"The Commodity Strategy Fund will be a low-cost, broad-based option for advisors and institutional investors seeking additional diversification and inflation protection for a well-balanced portfolio," said Matt Brancato, head of Vanguard's Portfolio Review Department. "We believe the commodity exposure can serve as an effective inflation hedge and also provide value in mitigating stock and bond risks."

Vanguard's new fund will bring a low-cost entrant to the commodity category, which has an average expense ratio of 1.25%.1 The fund will solely offer Admiral Shares at a $50,000 investment minimum, with an estimated expense ratio of 0.20%—less than a sixth of the cost of competing broad-based commodity-linked funds.

User avatar
bengal22
Posts: 1659
Joined: Sat Dec 03, 2011 6:20 pm
Location: Ohio

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by bengal22 » Thu Apr 04, 2019 9:50 am

Vanguard was and will always be a business first. And I wouldn't want it any other way
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

User avatar
Spinola
Posts: 141
Joined: Fri Nov 16, 2018 1:32 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Spinola » Thu Apr 04, 2019 10:01 am

Choice is good. Diversification is even better. Low(er) cost also a good thing.

alex_686
Posts: 4506
Joined: Mon Feb 09, 2015 2:39 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by alex_686 » Thu Apr 04, 2019 10:07 am

Spinola wrote:
Thu Apr 04, 2019 10:01 am
Choice is good. Diversification is even better. Low(er) cost also a good thing.
Is it? To play devil's advocate, I will point out that there is a positive correlation between a commodities expense ratio and their net (i.e., after expense) returns. Or, at least that was true 5 years ago. There is a active debate on what a passive commodities strategy would look like, and how such a fund would should fit into portfolio building. I personally think that commodities is a high skill asset class.

Angst
Posts: 1939
Joined: Sat Jun 09, 2007 11:31 am

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Angst » Thu Apr 04, 2019 11:08 am

Spinola wrote:
Thu Apr 04, 2019 10:01 am
Choice is good. Diversification is even better. Low(er) cost also a good thing.

Yes I think it's a good thing too, and I think that anyone who happens to still be following Larry Swedroe's advice from some 10 years ago will likely be pleased as well. Here's a bit more:

The press release also wrote:
Actively managed by Vanguard's experienced investment teams

Vanguard Commodity Strategy Fund will seek to outperform the Bloomberg Commodity Total Return Index by investing in commodity-linked derivative investments, such as commodity futures and swaps, collateralized by a mix of Treasury bills (T-bills) and short-term TIPS, which add an additional layer of inflation protection.

Vanguard's Quantitative Equity and Fixed Income Groups will serve as the fund's advisors, bringing their deep experience and expertise to the management of the fund. Vanguard's Quantitative Equity team, comprising 35 strategists, analysts, and portfolio managers, has managed Vanguard Managed Payout Fund's commodity strategy for more than 10 years. At launch, the $1.8 billion Vanguard Managed Payout Fund will reallocate its commodities exposure, consisting of $135 million, to the new fund, and will ultimately benefit from the added inflation protection.2 Vanguard's Fixed Income Group, with more than 175 investment professionals, oversees more than $1.2 trillion in assets, and manages one of the largest TIPS funds, Vanguard Short-Term Inflation-Protected Securities Fund with $27.8 billion in assets. The two teams oversee portions of the $316 million Vanguard Alternative Strategies Fund, as well.

2 Source: Vanguard, data as of February 28, 2019.

User avatar
Spinola
Posts: 141
Joined: Fri Nov 16, 2018 1:32 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Spinola » Thu Apr 04, 2019 11:19 am

Not to say that it is for everyone... not sure it is even right for me, but worth considering for some?

https://www.etf.com/sections/index-inve ... -inflation

User avatar
sleepysurf
Posts: 234
Joined: Sat Nov 23, 2013 6:59 am
Location: Florida

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by sleepysurf » Thu Apr 04, 2019 11:24 am

Interesting option for those seeking to further diversify with a non (equity) correlated asset class. I presume something like this would be best held in a tax deferred account.
Retired 2018 | ~50/45/5 (partially sliced and diced)

User avatar
dmcmahon
Posts: 1896
Joined: Fri Mar 21, 2008 10:29 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by dmcmahon » Thu Apr 04, 2019 11:29 am

Agreed, it's good to have access to this as an asset class. In a repeat of the 1970s economy this kind of uncorrelated asset might help.

I feel the same way about real estate as an asset class, and it's too bad there isn't any pure play on that. REIT funds tend to blend in lenders and other financial actors, and then you have to throw in the inherent leverage that a lot of the brick-and-mortar REITs carry. You are exposed to a lot of factors such as interest rates that you might rather avoid. I think TIAA/CREF has something that's more of a pure play but you have to be fortunate enough to have a 403b account with them to get access to it. And obviously large pension funds and endowments have access to it.

User avatar
abuss368
Posts: 13485
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by abuss368 » Thu Apr 04, 2019 11:50 am

dmcmahon wrote:
Thu Apr 04, 2019 11:29 am
Agreed, it's good to have access to this as an asset class. In a repeat of the 1970s economy this kind of uncorrelated asset might help.

I feel the same way about real estate as an asset class, and it's too bad there isn't any pure play on that. REIT funds tend to blend in lenders and other financial actors, and then you have to throw in the inherent leverage that a lot of the brick-and-mortar REITs carry. You are exposed to a lot of factors such as interest rates that you might rather avoid. I think TIAA/CREF has something that's more of a pure play but you have to be fortunate enough to have a 403b account with them to get access to it. And obviously large pension funds and endowments have access to it.
Vanguards REIT fund includes only equity REITs. No Hybrid or mortgage REITs are included in the index.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
abuss368
Posts: 13485
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by abuss368 » Thu Apr 04, 2019 11:50 am

Interesting fund launch. It provides access and options to someone who may have a need or desire.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
mokaThought
Posts: 25
Joined: Tue Jan 01, 2019 7:57 pm
Location: Texas
Contact:

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by mokaThought » Thu Apr 04, 2019 12:18 pm

alex_686 wrote:
Thu Apr 04, 2019 10:07 am
There is a active debate on what a passive commodities strategy would look like, and how such a fund would should fit into portfolio building. I personally think that commodities is a high skill asset class.
I'll be interested to see how exactly they manage this. It seems "easy" enough to construct a passive commodity portion of a portfolio with a few ETFs, at least until there's some insistence upon holding physical assets. Knowing what commodities to put there might be something else.
October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. —Mark Twain

User avatar
Kenkat
Posts: 4774
Joined: Thu Mar 01, 2007 11:18 am
Location: Cincinnati, OH

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Kenkat » Thu Apr 04, 2019 12:25 pm

Will this now become the preferred choice over PCRIX - Pimco Commodities Real Return - for those of us foolish enough to still own these things?

alex_686
Posts: 4506
Joined: Mon Feb 09, 2015 2:39 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by alex_686 » Thu Apr 04, 2019 12:27 pm

mokaThought wrote:
Thu Apr 04, 2019 12:18 pm
I'll be interested to see how exactly they manage this. It seems "easy" enough to construct a passive commodity portion of a portfolio with a few ETFs, at least until there's some insistence upon holding physical assets. Knowing what commodities to put there might be something else.
I am not following what you said. Let me expound my part.

With passive investing you build a index and follow that index. For equities it is straight forward - free float market cap. After all - that is the market.

Commodities are different. How do you determine the weight for each commodity in the fund? Metals verse agriculture goods? Gold verse Silver? The volume and number of outstanding future contracts have a low correlation to production or use. Gold trades furiously but very little of it is mined or used. Wheat has far larger flows in terms of actually production, but little trading.

I have seen lots of arguments for one weight method verse another, but there is not a clear cut winner like free float market cap for equities.

Once you have a index methodology it is very easy to run a fund.

User avatar
Barry Barnitz
Wiki Admin
Posts: 3101
Joined: Mon Feb 19, 2007 10:42 pm
Contact:

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Barry Barnitz » Thu Apr 04, 2019 1:16 pm

Hi:

Here is the preliminary prospectus of the Vanguard Commodity Strategy Fund, filed with the SEC: Prospectus 2019.

regards,
Image | blb | December Birthday Celebration: Ludwig van Beethoven

jdb
Posts: 1531
Joined: Wed Dec 05, 2012 8:21 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by jdb » Thu Apr 04, 2019 2:04 pm

I lost monies on PCRIX years ago until I finally threw in the towel and exited commodities. I remember thinking that would not touch asset class again unless Vanguard had a fund. Be careful what you wish for. So I may invest some of my tax deferred account into this fund. Some people like me never learn. Good luck.
Last edited by jdb on Fri Apr 05, 2019 3:49 pm, edited 1 time in total.

User avatar
jhfenton
Posts: 3925
Joined: Sat Feb 07, 2015 11:17 am
Location: Ohio

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by jhfenton » Thu Apr 04, 2019 2:05 pm

I will give the fund a look. I've always been intrigued by commodities, but the generally high cost, issues with index construction, managing roll cost/contango, etc. has led me to steer clear. That and the fact that there's not a clear reason to think commodities have an expected positive return.

But there are some commodity ETFs now with ERs in the 25-28 bp range, so cost has come down to a reasonable range. And funds like CMDY/iShares Bloomberg Roll Select Commodity Strategy ETF at 28 bp even claim to try to actively manage roll cost/yield. So I will take another look. I haven't really taken a close look at the performance and construction of the new funds. (CMDY is only a year old. BCI and COMB at 25 bp are about 2 years old. So there's not a long track record for any of these ETFs.)

My assumptions based on the press release is that Vanguard's fund will be managed by the quantitative equity group on a similar theory to CMDY. I doubt they will make big bets on the direction of commodity prices, but they will likely try to eek out a bit of return over a purely passive index using a quantitative strategy.

I'll take a fresh look when the fund opens, but it will probably not be a first day purchase, the way that Vanguard's Emerging Markets Bond Admiral Shares (VEGBX) were 16 months ago or that Vanguard's US Multifactor Admiral Shares (VFMFX) were 14 months ago.

animule
Posts: 138
Joined: Sun Jan 06, 2008 12:29 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by animule » Thu Apr 04, 2019 2:11 pm

Drawing a line in the sand on this one.

If they eventually add this to their retirement date funds (which seems likely given past experience), I will be dumping those funds and moving to something else that is less prone to tinkering.

Vanguard has proven to have an itch to keep changing these target date funds and not leave well enough alone. I'm not sure that the last big move to bump up international and also add international bonds has really panned out all that well.

DonIce
Posts: 413
Joined: Thu Feb 21, 2019 6:44 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by DonIce » Thu Apr 04, 2019 2:20 pm

Is this fund gonna generate K-1s? I like some of the new K1 free commodity funds.

james22
Posts: 1308
Joined: Tue Aug 21, 2007 2:22 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by james22 » Thu Apr 04, 2019 2:51 pm

It'll be a first day purchase for me, barring Swedroe's take.
This whole episode is likely to end so badly that future children will learn about it in school and shake their heads in wonder at the rank stupidity of it all... Hussman

User avatar
jeffyscott
Posts: 7728
Joined: Tue Feb 27, 2007 9:12 am
Location: Wisconsin

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by jeffyscott » Thu Apr 04, 2019 2:56 pm

mokaThought wrote:
Thu Apr 04, 2019 12:18 pm
alex_686 wrote:
Thu Apr 04, 2019 10:07 am
There is a active debate on what a passive commodities strategy would look like, and how such a fund would should fit into portfolio building. I personally think that commodities is a high skill asset class.
I'll be interested to see how exactly they manage this. It seems "easy" enough to construct a passive commodity portion of a portfolio with a few ETFs, at least until there's some insistence upon holding physical assets. Knowing what commodities to put there might be something else.
It's not passive, the announcement says "actively managed".
press on, regardless - John C. Bogle

User avatar
jhfenton
Posts: 3925
Joined: Sat Feb 07, 2015 11:17 am
Location: Ohio

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by jhfenton » Thu Apr 04, 2019 2:57 pm

animule wrote:
Thu Apr 04, 2019 2:11 pm
Drawing a line in the sand on this one.

If they eventually add this to their retirement date funds (which seems likely given past experience), I will be dumping those funds and moving to something else that is less prone to tinkering.

Vanguard has proven to have an itch to keep changing these target date funds and not leave well enough alone. I'm not sure that the last big move to bump up international and also add international bonds has really panned out all that well.
The international bonds have panned out well. They have outperformed US bonds since they were added. The increase in international equities has not yet, although a change from 30% to 40% doesn't really move the dial much one way or another.

I would be shocked if they added this to their target retirement funds. It would potentially cause ripples through a market that they do very well in. I see this fund as a vehicle for advisors who have probably been asking for it, and for their managed payout fund, which has always had a commodities component to it.

staythecourse
Posts: 6848
Joined: Mon Jan 03, 2011 9:40 am

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by staythecourse » Thu Apr 04, 2019 2:57 pm

alex_686 wrote:
Thu Apr 04, 2019 10:07 am
Spinola wrote:
Thu Apr 04, 2019 10:01 am
Choice is good. Diversification is even better. Low(er) cost also a good thing.
I personally think that commodities is a high skill asset class.
Funny, I view commodities as as a no skill high luck/ speculation asset class. It has been that way since I first watched "Trading Places" in regards to soybeans. It definitely has he smell of the greater fool theory.

The Yale profs who wrote the seminal paper on CCF and started their own CCF (USCI or something like that) has done poor as well, so not sure how anyone thinks they can RELIABLY do well in this asset class.

Besides, Vanguards own paper on hedges against UNexpected inflation showed that CCF are only good for short term (<3 months) of unexpected inflation which makes sense as after that much time the expected and spot prices should start to narrow again.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

alex_686
Posts: 4506
Joined: Mon Feb 09, 2015 2:39 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by alex_686 » Thu Apr 04, 2019 3:23 pm

staythecourse wrote:
Thu Apr 04, 2019 2:57 pm
Funny, I view commodities as as a no skill high luck/ speculation asset class. It has been that way since I first watched "Trading Places" in regards to soybeans. It definitely has he smell of the greater fool theory. ... Good luck.
While I am skeptical of commodities funds, and I don't own any, I don't think they are as bad as you suggest.

heyyou
Posts: 3379
Joined: Tue Feb 20, 2007 4:58 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by heyyou » Thu Apr 04, 2019 11:30 pm

CCF funds would have done very well during the 1970s oil import shortages, but that will not happen again with fracking of our previous oil fields. Gold has had some one time price boosts too. Note the emphasis on those singular events. Also, some factors have been subdued by their increased popularity aka performance chasing.
I will wait to see the ten year results of this new fund.

Your ability and willingness to adapt your spending to your portfolio returns during retirement, is far better for portfolio survival than allocation yoga.

boglerdude
Posts: 681
Joined: Fri Jul 10, 2015 1:28 am

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by boglerdude » Fri Apr 05, 2019 1:34 am

Like gold, I'll get a little of this as insurance.

Now, a Vanguard CATbond fund might be nice too.
viewtopic.php?t=204664

User avatar
beyou
Posts: 2445
Joined: Sat Feb 27, 2010 3:57 pm
Location: Northeastern US

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by beyou » Fri Apr 05, 2019 1:51 am

My short term bond funds, tips fund and I savings bonds provide plenty of inflation protection, with income while holding, less volatility.

Not sure I would add this.

But if so, is this tax efficient ?
Taxable or tax def accts ?
Will hold lots of bonds so likely tax deferred.

Moneybags1
Posts: 130
Joined: Sat Jun 06, 2009 7:09 am
Location: Citrus Co Florida

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Moneybags1 » Fri Apr 05, 2019 5:04 am

Am I missing something here? As I understand the OP, this fund is only available to advisors and institutional investors..

gtwhitegold
Posts: 398
Joined: Fri Sep 21, 2012 1:55 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by gtwhitegold » Fri Apr 05, 2019 8:06 am

Moneybags1 wrote:
Fri Apr 05, 2019 5:04 am
Am I missing something here? As I understand the OP, this fund is only available to advisors and institutional investors..
It's marketed towards them, but anyone with $50,000 to invest will be able to.

User avatar
jhfenton
Posts: 3925
Joined: Sat Feb 07, 2015 11:17 am
Location: Ohio

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by jhfenton » Fri Apr 05, 2019 9:23 am

gtwhitegold wrote:
Fri Apr 05, 2019 8:06 am
Moneybags1 wrote:
Fri Apr 05, 2019 5:04 am
Am I missing something here? As I understand the OP, this fund is only available to advisors and institutional investors..
It's marketed towards them, but anyone with $50,000 to invest will be able to.
+1 Similar to the factor funds Vanguard launched 14 months ago and the active emerging markets bond fund that they launched 17 months ago. In fact, similar language was in the press release for VEGBX:
The new fund is designed to offer financial advisors and institutions the potential for additional diversification, along with potentially higher returns that can accompany the considerable volatility associated with emerging markets debt.
I invested in the emerging markets bond fund and the U.S. multifactor fund on the first day. (Vanguard still doesn't list any of the factor ETFs or the multifactor mutual fund on the investor website ETF/fund lists.)

Whakamole
Posts: 898
Joined: Wed Jan 13, 2016 9:59 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Whakamole » Fri Apr 05, 2019 9:29 am

Will it offer in-kind redemption, I'd love to have a truck of pork bellies delivered to my door.

cheezit
Posts: 188
Joined: Sat Jul 14, 2018 7:28 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by cheezit » Fri Apr 05, 2019 12:22 pm

Whakamole wrote:
Fri Apr 05, 2019 9:29 am
Will it offer in-kind redemption, I'd love to have a truck of pork bellies delivered to my door.
Now we're talking!

vu8
Posts: 260
Joined: Tue May 29, 2018 10:15 am
Location: Columbus, Ohio

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by vu8 » Fri Apr 05, 2019 12:27 pm

Let's trade soy beans, cocoa beans, gold silver palladium, all day long, in real time! :oops: :oops: :oops:

User avatar
Phineas J. Whoopee
Posts: 8134
Joined: Sun Dec 18, 2011 6:18 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Phineas J. Whoopee » Fri Apr 05, 2019 12:52 pm

MFInvestor wrote:
Thu Apr 04, 2019 9:31 am
...
Where have you gone, Jack Bogle
A nation turns its lonely eyes to you
...
Nice reference.

I don't really care if Vanguard offers funds I don't want, any more than that the grocery store sells mayonnaise, which to my palate is intensely bad.

PJW

Crushtheturtle
Posts: 149
Joined: Sat Mar 15, 2014 10:29 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Crushtheturtle » Fri Apr 05, 2019 1:05 pm

"You can fondle Vanguard's Commodities fund, but it will not respond." - Warren Buffett, probably

Day9
Posts: 685
Joined: Mon Jun 11, 2012 6:22 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Day9 » Fri Apr 05, 2019 1:26 pm

The idea many of us had was that adding a splash of a commodity-linked investment and simultaneously extending the duration of your bond portfolio can improve risk-adjusted return. Commodities are meant help in a stagflation scenario when real returns on both stocks and bonds are poor.

I think the reason this idea has been abandoned is because we have not had stagflation in decades, commodities have 0 expected real return (beyond meager yield of assets held in collateral, security lending, or the like), adding duration risk doesn't give that much more yield anymore, and the people interested in this idea are now interested in other alternatives like reinsurance.
I'm just a fan of the person I got my user name from

Angst
Posts: 1939
Joined: Sat Jun 09, 2007 11:31 am

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Angst » Fri Apr 05, 2019 2:11 pm

I agree, and I note with disappointment how quickly Larry will respond in defense of Stone Ridge cat-bonds investments, but all's quiet on the commodities front.

gtwhitegold
Posts: 398
Joined: Fri Sep 21, 2012 1:55 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by gtwhitegold » Fri Apr 05, 2019 2:47 pm

I don't see why there is so much hate for this fund.

Personally, I'm not going to invest in it when it becomes available, but I will consider it at a later time.

I also agree with Day9 in how it should be implemented in a portfolio. Too bad that it includes short term bonds and not intermediate or long term bonds to increase diversification.

User avatar
Phineas J. Whoopee
Posts: 8134
Joined: Sun Dec 18, 2011 6:18 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Phineas J. Whoopee » Fri Apr 05, 2019 3:08 pm

gtwhitegold wrote:
Fri Apr 05, 2019 2:47 pm
I don't see why there is so much hate for this fund.

Personally, I'm not going to invest in it when it becomes available, but I will consider it at a later time.

I also agree with Day9 in how it should be implemented in a portfolio. Too bad that it includes short term bonds and not intermediate or long term bonds to increase diversification.
You call people neither wishing nor advocating to buy a particular fund hate?

PJW

vu8
Posts: 260
Joined: Tue May 29, 2018 10:15 am
Location: Columbus, Ohio

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by vu8 » Fri Apr 05, 2019 3:13 pm

Soon there'll be a crypto currency fund, an painting/sculptures fund, a private equity fund and a peer to peer lending fund

Sconie
Posts: 575
Joined: Sun Feb 07, 2010 10:23 am
Location: Arizona

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Sconie » Fri Apr 05, 2019 3:30 pm

Just FWIW, John Bogle on commodities:

https://www.morningstar.com/videos/3013 ... amble.html
I know that you think you understand what you thought I said, but I'm not sure you realize that what I said is necessarily what I meant......

User avatar
nisiprius
Advisory Board
Posts: 37990
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by nisiprius » Fri Apr 05, 2019 3:38 pm

jhfenton wrote:
Thu Apr 04, 2019 2:57 pm
...I would be shocked if they added this to their target retirement funds. It would potentially cause ripples through a market that they do very well in. I see this fund as a vehicle for advisors who have probably been asking for it, and for their managed payout fund, which has always had a commodities component to it...
That all seems likely. The story says
The Commodity Strategy Fund will be a low-cost, broad-based option for advisors and institutional investors ... The fund will solely offer Admiral Shares at a $50,000 investment minimum...
That's not quite in the same category as the Market Neutral fund ($250,000 minimum) and the Alternative Strategies fund ($250,000 minimum), but when they say it is "for advisors and institutional investors" I believe them.

I just checked Common Sense on Mutual Funds, and John C. Bogle only mentions "commodities" in one context: the idea that index funds are "commoditizing" stock market investing; mutual funds are "a commodity" in the other sense of the word.
Sconie wrote:
Fri Apr 05, 2019 3:30 pm
Just FWIW, John Bogle on commodities:

https://www.morningstar.com/videos/3013 ... amble.html
Oh, good. Couldn't be clearer.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
nisiprius
Advisory Board
Posts: 37990
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by nisiprius » Fri Apr 05, 2019 3:42 pm

vu8 wrote:
Fri Apr 05, 2019 3:13 pm
Soon there'll be a crypto currency fund, an painting/sculptures fund, a private equity fund and a peer to peer lending fund
And while they're busy doing that, Schwab will launch a line of zero expense ratio index funds.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

robertmcd
Posts: 338
Joined: Tue Aug 09, 2016 9:06 am

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by robertmcd » Fri Apr 05, 2019 3:49 pm

gtwhitegold wrote:
Fri Apr 05, 2019 2:47 pm
I don't see why there is so much hate for this fund.

Personally, I'm not going to invest in it when it becomes available, but I will consider it at a later time.

I also agree with Day9 in how it should be implemented in a portfolio. Too bad that it includes short term bonds and not intermediate or long term bonds to increase diversification.
Well I think it should be used solely in a diversified portfolio as a hedge against inflation, so in my opinion it should hold tips/t bill/floating rate notes since your intermediate/long term treasury bonds cover you for deflation.

Silence Dogood
Posts: 775
Joined: Tue Feb 01, 2011 9:22 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Silence Dogood » Fri Apr 05, 2019 4:43 pm

animule wrote:
Thu Apr 04, 2019 2:11 pm
Drawing a line in the sand on this one.

If they eventually add this to their retirement date funds (which seems likely given past experience), I will be dumping those funds and moving to something else that is less prone to tinkering.

Vanguard has proven to have an itch to keep changing these target date funds and not leave well enough alone. I'm not sure that the last big move to bump up international and also add international bonds has really panned out all that well.
Like others, I find it extremely unlikely that Vanguard will add this to their target retirements funds. If they do, I will be incredibly disappointed.

The target retirement funds as they are right now are excellent - stocks and bonds only. Vanguard has increased the international allocation as costs have gone down.

Personally, I'm not in favor of "alternative" asset classes. I'll stick with stocks and bonds.

Silence Dogood
Posts: 775
Joined: Tue Feb 01, 2011 9:22 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Silence Dogood » Fri Apr 05, 2019 4:46 pm

nisiprius wrote:
Fri Apr 05, 2019 3:42 pm
vu8 wrote:
Fri Apr 05, 2019 3:13 pm
Soon there'll be a crypto currency fund, an painting/sculptures fund, a private equity fund and a peer to peer lending fund
And while they're busy doing that, Schwab will launch a line of zero expense ratio index funds.
No kidding! :P

User avatar
nisiprius
Advisory Board
Posts: 37990
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by nisiprius » Fri Apr 05, 2019 5:23 pm

jhfenton wrote:
animule wrote:...If they eventually add this to their retirement date funds (which seems likely given past experience)...
Like others, I find it extremely unlikely that Vanguard will add this to their target retirements funds. If they do, I will be incredibly disappointed...
The blue line is Fidelity Freedom 2035. (The Freedom funds are its flagship target-date funds). The orange line is Vanguard Target Retirement 2035.

Notice how they track together up to 2009, then they diverge, with Fidelity falling farther and farther behind Vanguard?

Source

Image

Barron's, October 12, 2009: Fidelity Shifts Its Asset Allocation
Have you shifted your asset allocation recently, in light of these trends?

Yes, late in September, we increased target exposure to international equity funds to 30%, from 20%, and added dedicated exposure to commodities, TIPS [Treasury inflation-protected securities], floating-rate loans and real estate.
Reuters, January 4th, 2018: Fidelity retirement funds take multiyear hit from commodities bet
Fidelity Investments’ bet on commodities for its flagship retirement funds has declined 38 percent over the past five years, while top rivals have avoided the sector altogether or made money with more-conservative strategies....

The Boston-based company inserted its new Fidelity Series Commodity Strategy Fund into its Freedom Funds in 2009 to diversify their portfolios from stocks and bonds while giving them a weapon against inflation. But U.S. inflation has been weak for years, while stocks have been surging.

Realized losses in the Commodity Strategy Fund have totaled $3.26 billion since 2012, according to its financial statements.
Last edited by nisiprius on Fri Apr 05, 2019 7:23 pm, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
nisiprius
Advisory Board
Posts: 37990
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by nisiprius » Fri Apr 05, 2019 5:30 pm

Whakamole wrote:
Fri Apr 05, 2019 9:29 am
Will it offer in-kind redemption, I'd love to have a truck of pork bellies delivered to my door.
Alas, the Chicago Mercantile Exchange stopped trading pork bellies in 2011. I am sure all mourn the passing of this compulsively comedic commodity. There is nothing that can really take its place. There is "rough rice," but it's just not as funny.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
Rob5TCP
Posts: 3242
Joined: Tue Jun 05, 2007 7:34 pm
Location: New York, NY

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Rob5TCP » Fri Apr 05, 2019 6:00 pm

Kenkat wrote:
Thu Apr 04, 2019 12:25 pm
Will this now become the preferred choice over PCRIX - Pimco Commodities Real Return - for those of us foolish enough to still own these things?
Ten yrs ago I followed the debate and purchased PCRIX. Because of the wisdom here, I cut my purchase by almost 60% ($10k vs. $25k).
Even with re-balancing; it was my worst investment of the decade. Unless Vanguard has some wisdom that Pimco didn't/doesn't; this will be one area I will avoid.

Trader Joe
Posts: 595
Joined: Fri Apr 25, 2014 6:38 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by Trader Joe » Fri Apr 05, 2019 6:00 pm

MFInvestor wrote:
Thu Apr 04, 2019 9:31 am
Vanguard Announces Plans to Launch Commodities Fund

https://www.prnewswire.com/news-release ... 24779.html

Where have you gone, Jack Bogle
A nation turns its lonely eyes to you

VALLEY FORGE, Pa., April 4, 2019 /PRNewswire/ -- Vanguard today filed a preliminary registration statement with the Securities and Exchange Commission for Vanguard Commodity Strategy Fund. The new actively-managed fund, which is expected to launch in June 2019, will offer investors added portfolio diversification, along with a potential hedge against inflation risk by investing primarily in commodities and treasury inflation protected securities (TIPS).

"The Commodity Strategy Fund will be a low-cost, broad-based option for advisors and institutional investors seeking additional diversification and inflation protection for a well-balanced portfolio," said Matt Brancato, head of Vanguard's Portfolio Review Department. "We believe the commodity exposure can serve as an effective inflation hedge and also provide value in mitigating stock and bond risks."

Vanguard's new fund will bring a low-cost entrant to the commodity category, which has an average expense ratio of 1.25%.1 The fund will solely offer Admiral Shares at a $50,000 investment minimum, with an estimated expense ratio of 0.20%—less than a sixth of the cost of competing broad-based commodity-linked funds.
Very sad to hear. I recommend that all investors start here:

https://www.bogleheads.org/wiki/Main_Page

grok87
Posts: 8661
Joined: Tue Feb 27, 2007 9:00 pm

Re: Vanguard Announces Plans to Launch Commodities Fund

Post by grok87 » Sat Apr 06, 2019 7:59 am

Interesting.

For those interested here is a link to the monthly bloomberg reports on the commodity index Vanguard will be benchmarking against
https://data.bloomberglp.com/promo/site ... utlook.pdf
from page 18 commodities are still in contango of -3.6% and that has gotten worse over the past year (a year ago the contango was -3.3%)

i may have some interest if things swing into backwardation but i'm not expecting that anytime soon.

more discussion here
viewtopic.php?t=243986

cheers,
grok
RIP Mr. Bogle.

Post Reply