Why do Vanguard Target Retirement and LifeStrategy hold "Investor" rather than "Admiral" shares?

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hagridshut
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Why do Vanguard Target Retirement and LifeStrategy hold "Investor" rather than "Admiral" shares?

Post by hagridshut » Sun Jul 07, 2019 8:21 am

Vanguard's Target Retirement funds are a fund of these funds:

Vanguard Total Stock Market Index Fund Investor Shares
Vanguard Total Bond Market II Index Fund Investor Shares*
Vanguard Total International Stock Index Fund Investor Shares
Vanguard Total International Bond Index Fund
Vanguard Short-Term Inflation-Protected Securities Index Fund Investor Shares

Their LifeStrategy funds are a fund of these funds:

Vanguard Total Stock Market Index Fund Investor Shares
Vanguard Total Bond Market II Index Fund Investor Shares*
Vanguard Total International Stock Index Fund Investor Shares
Vanguard Total International Bond Index Fund

Why doesn't Vanguard use Admiral shares for the underlying components of the Target Retirement and LifeStrategy funds? Target Retirement funds have 10s of Billions in assets. Shouldn't a large "customer" of an underlying fund qualify for Admiral status?

The ER of VTSMX (Vanguard Total Stock Market Index Fund Investor Shares) is 0.14%. The ER of VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) is 0.04%.

It seems to me that the ER of Target Retirement and LifeStrategy (typically 0.13-0.14%) could be lower if they used Admiral shares. Maybe there is some transactional or administrative cost that prevents them from using Admiral. Anyone know?
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maj
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Re: Why do Vanguard Target Retirement and LifeStrategy hold "Investor" rather than "Admiral" shares?

Post by maj » Sun Jul 07, 2019 11:18 am

You are correct--it is an administrative issue re costs.

If Admiral funds were used, Vanguard would likely need to add a few basis points to cover the extra expenses of managing and rebalancing the multi-fund portfolio.

As the cost of investor class shares decrease, there is a corresponding decrease in the ER of the multi-find portfolios.

peace

livesoft
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Re: Why do Vanguard Target Retirement and LifeStrategy hold "Investor" rather than "Admiral" shares?

Post by livesoft » Sun Jul 07, 2019 11:21 am

Personally, I think that Vanguard just hasn't updated their web pages. Investor shares don't really exist anymore for the retail investor, do they?
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Silence Dogood
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Re: Why do Vanguard Target Retirement and LifeStrategy hold "Investor" rather than "Admiral" shares?

Post by Silence Dogood » Sun Jul 07, 2019 1:35 pm

FYI, there are now rumors that, within the next couple of years, Vanguard will lower the cost of their Target Retirement funds and LifeStrategy funds by using the equivalent ETF share classes for the underlying funds.

randomguy
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Re: Why do Vanguard Target Retirement and LifeStrategy hold "Investor" rather than "Admiral" shares?

Post by randomguy » Sun Jul 07, 2019 1:41 pm

Silence Dogood wrote:
Sun Jul 07, 2019 1:35 pm
FYI, there are now rumors that, within the next couple of years, Vanguard will lower the cost of their Target Retirement funds and LifeStrategy funds by using the equivalent ETF share classes for the underlying funds.
The target date funds have billions in assets. They should be holding those institute plus share and not high prices admiral/etfs. They don't since vanguard needs to make money.

stan1
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Re: Why do Vanguard Target Retirement and LifeStrategy hold "Investor" rather than "Admiral" shares?

Post by stan1 » Sun Jul 07, 2019 1:43 pm

Many of these funds are in IRAs and 401Ks. There may be extra 401K administrative costs that Vanguard is trying to knock down to lower expenses (such as placement fees). 401Ks also have a lot of transactions (every pay period every participant buys). Same with people who invest monthly into an IRA into these funds. If Vanguard can move to an ETF based approach which avoids the underlying mutual fund buy (and sell) transactions they should be able to reduce those transaction costs.

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

Re: Why do Vanguard Target Retirement and LifeStrategy hold "Investor" rather than "Admiral" shares?

Post by Silence Dogood » Sun Jul 07, 2019 1:51 pm

randomguy wrote:
Sun Jul 07, 2019 1:41 pm
Silence Dogood wrote:
Sun Jul 07, 2019 1:35 pm
FYI, there are now rumors that, within the next couple of years, Vanguard will lower the cost of their Target Retirement funds and LifeStrategy funds by using the equivalent ETF share classes for the underlying funds.
The target date funds have billions in assets. They should be holding those institute plus share and not high prices admiral/etfs. They don't since vanguard needs to make money.
VTI: 0.03% expense ratio
VSMPX: 0.02% expense ratio

Not much of a difference...

"high prices" :confused

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