Why has VGHAX expense ratio grown by 136% since 2005-6?

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tmwtp
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Joined: Mon Jun 11, 2018 7:04 pm

Why has VGHAX expense ratio grown by 136% since 2005-6?

Post by tmwtp » Mon Jun 11, 2018 7:56 pm

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.

PFInterest
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Joined: Sun Jan 08, 2017 12:25 pm

Re: Why has VGHAX expense ratio grown by 136% since 2005-6?

Post by PFInterest » Tue Jun 12, 2018 1:13 pm

dont know. dont care. either it fits your plan or it doesnt.

guyesmith
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Joined: Fri Mar 23, 2018 11:16 am

Re: Why has VGHAX expense ratio grown by 136% since 2005-6?

Post by guyesmith » Tue Jun 12, 2018 1:18 pm

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.

lack_ey
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Re: Why has VGHAX expense ratio grown by 136% since 2005-6?

Post by lack_ey » Tue Jun 12, 2018 1:22 pm

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.

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jhfenton
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Re: Why has VGHAX expense ratio grown by 136% since 2005-6?

Post by jhfenton » Tue Jun 12, 2018 2:37 pm

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.

SlowMovingInvestor
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Re: Why has VGHAX expense ratio grown by 136% since 2005-6?

Post by SlowMovingInvestor » Tue Jun 12, 2018 6:05 pm

jhfenton wrote:
Tue Jun 12, 2018 2:37 pm
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.

tibbitts
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Re: Why has VGHAX expense ratio grown by 136% since 2005-6?

Post by tibbitts » Tue Jun 12, 2018 6:48 pm

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.

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