4 Vanguard Funds Pummeled by Outflows

[yzy]

VPMAX is certainly not pummeled.

We have had PRIMECAP for decades. We used to add the annual max ($25k per account, if memory serves), but haven’t done so since moving to Schwab. I don’t follow it closely, but I think it does okay. I surely don’t feel pummeled.

Pummeled is a strong word for sure - when a fund like VPMAX has outflows of 4.4% (~$77 billion under management). Quote here https://www.morningstar.com/funds/most- ... tf-flows-2

"Primecap, this is the original Primecap, lost... $3.4 billion over those six months. Primecap Core lost around $950 million, close to a billion dollars over that period. So again, they’re struggling a little bit. This isn’t something that threatens the viability of the funds. These are very big funds, so they can absorb that a little bit, but it is something to keep an eye on, and we’re watching.

And the other important thing with flows is you think about capital gains distributions because a lot of that can trigger managers to have to sell positions. Hasn’t been a big problem so far, but again, something worth keeping an eye on if you are invested in those funds."

But of course what matters to us who are still in it are the potential Cap Gains hits we'll see going forward. VPMAX already pays out large Cap Gains annually - so if these outflows culminate in higher Cap Gains, one may want to prepare. I still buy into VPMAX, but now do so within tax advantaged accts. I still have my original purchases from the 90s and the oughts, which are a substantive part of my folio. So, while it does bear watching, there really isn't anything to be done since I'm sitting on large capital gains since then and am locked in for the ride.

In a similar situation. I remember when Primecap was closed and I scrounged all my dollars, after maxing 401k of course, to invest in Primecap, taxable. Haven’t added in 10+ years. Now use the annual capital gains to help out the kids, vacations, car payments, etc. Nice bonus for all those years of scrounging.

[beyou]

I think this is more indicative of the shift to ETFs. Even some index mutual funds have seen outflows, especially asset allocation funds.

Bogle warned about ETFs, he was right...if you give people the chance to play portfolio manager they will do so.

One could play portfolio manager long before ETFs were first created.

[typical.investor]

I think this is more indicative of the shift to ETFs. Even some index mutual funds have seen outflows, especially asset allocation funds.

Bogle warned about ETFs, he was right...if you give people the chance to play portfolio manager they will do so.

Bogle didn’t ever have to work overseas during a period when mutual fund distribution agreements were enforced thus leaving one with a choice of index ETFs or individual stocks. He’d have chosen the ETFs. Not trade, but buy and hold them.

[Hacksawdave]

Pummeled is a strong word for sure - when a fund like VPMAX has outflows of 4.4% (~$77 billion under management). Quote here https://www.morningstar.com/funds/most- ... tf-flows-2

"Primecap, this is the original Primecap, lost... $3.4 billion over those six months. Primecap Core lost around $950 million, close to a billion dollars over that period. So again, they’re struggling a little bit. This isn’t something that threatens the viability of the funds. These are very big funds, so they can absorb that a little bit, but it is something to keep an eye on, and we’re watching.

And the other important thing with flows is you think about capital gains distributions because a lot of that can trigger managers to have to sell positions. Hasn’t been a big problem so far, but again, something worth keeping an eye on if you are invested in those funds."

But of course what matters to us who are still in it are the potential Cap Gains hits we'll see going forward. VPMAX already pays out large Cap Gains annually - so if these outflows culminate in higher Cap Gains, one may want to prepare. I still buy into VPMAX, but now do so within tax advantaged accts. I still have my original purchases from the 90s and the oughts, which are a substantive part of my folio. So, while it does bear watching, there really isn't anything to be done since I'm sitting on large capital gains since then and am locked in for the ride.

In a similar situation. I remember when Primecap was closed and I scrounged all my dollars, after maxing 401k of course, to invest in Primecap, taxable. Haven’t added in 10+ years. Now use the annual capital gains to help out the kids, vacations, car payments, etc. Nice bonus for all those years of scrounging.

I remember for many years the only way for a new investor to enter Primecap, Explorer, and Windsor funds was through the STAR fund VGSTX. Now the irony is STAR will be “removing” (liquidating) its 3.7% holding in the Explorer Fund (STAR represents 27.45% ownership in Explorer assets per 2/28/25 Explorer SAI). STAR will replace Explorer with Dividend Growth VDIGX, so there will definitely be a structure change to STAR. I have owned STAR since 1996 and glad they will keep Primecap as it has been a solid holding over time.

This should be interesting to watch the distribution realized CGs and outflows for both Explorer and STAR funds during transition.

[hnd]

1. I would guess that the avg age of investors holding these mutual funds is much greater than the average overall age of investors. people are kicking the bucket and beneficiaries are taking the cash out of these funds.

2. They are active funds and even though they are rightly priced, the transition to index investing has taken over and it affects all active funds not just the most expensive ones.

3. the eventual ETF takeover. the flows into ETF's is nuts and IMO the only thing keeping mutual funds alive at this point (i'm being dramatic) is point #1 and 401k plans.

4. this one is very much my opinion but Vanguard's platform STINKS compared to other places you can invest. and you have to buy them there to not pay fees. I can tell you that the reason I own none of them is because it wasn't even a remote consideration when we had to switch brokers. (I have 3 accounts there for my kids already that i don't want to unwind taxwise)

[Beensabu]

Now the irony is STAR will be “removing” (liquidating) its 3.7% holding in the Explorer Fund (STAR represents 27.45% ownership in Explorer assets per 2/28/25 Explorer SAI).

So the expense ratio for VEXRX is probably going to go up, huh?

[Hacksawdave]

Now the irony is STAR will be “removing” (liquidating) its 3.7% holding in the Explorer Fund (STAR represents 27.45% ownership in Explorer assets per 2/28/25 Explorer SAI).

So the expense ratio for VEXRX is probably going to go up, huh?

Good question. Depending on how the position is unwound, it could cause the ER percentage to increase. There is another fund-of-fund, Vanguard’s Diversified Equity Fund VDEQX that has a 9.14% ownership of Explorer that could absorb some or all of STAR’s shares.

The Vanguard STAR news release stated the equity transition to begin in Q1 and STAR's new bond fund portion expected to be rolled out by end of Q1. If one owns either fund, I would keep tabs on the fund’s distribution tabs that get updated around the 15th of each month to view updated realized CGs. I already do this for all funds for tax and ACA purposes.

[Beensabu]

If one owns either fund, I would keep tabs on the fund’s distribution tabs that get updated around the 15th of each month to view updated realized CGs.

Unrealized gains of VEXRX are nearly a quarter of NAV...

Recommend you start a new PSA thread about the STAR fund change. It will probably affect people who hold the Explorer fund in taxable (if anyone actually does that) more than it will affect people who hold the STAR fund.

[sycamore]

If one owns either fund, I would keep tabs on the fund’s distribution tabs that get updated around the 15th of each month to view updated realized CGs.

Unrealized gains of VEXRX are nearly a quarter of NAV...

Recommend you start a new PSA thread about the STAR fund change. It will probably affect people who hold the Explorer fund in taxable (if anyone actually does that) more than it will affect people who hold the STAR fund.

Here's the thread: Vanguard Announces Allocation Changes for Vanguard STAR Fund - in Q1 2025

[Hacksawdave]

Unrealized gains of VEXRX are nearly a quarter of NAV...

Recommend you start a new PSA thread about the STAR fund change. It will probably affect people who hold the Explorer fund in taxable (if anyone actually does that) more than it will affect people who hold the STAR fund.

Here's the thread: Vanguard Announces Allocation Changes for Vanguard STAR Fund - in Q1 2025

Thank sycamore, you saved me a bunch of typing! Your post on the update also highlights the impact. Folks can see if they own any of the underlying managed funds and check for any impact on those for realized gains (outside of the normal amount) if the underlying funds had to sell equities.

STAR must have done a little work at the beginning of the year as they have already realized $1.34 (4.75% of NAV) in CGs already. Transitioning the bond funds might lower this number by the April update (if they are on schedule). A link to STAR's distribution and realized gains tab:

https://investor.vanguard.com/investmen ... tributions

[Metsfan91]

From Morningstar https://www.morningstar.com/funds/4-van ... outflows-2

Is it a good time to buy any of these?

I hold none of them.

[bikefish]

Can the moderators close this thread please? Thank you.

Edit > if there is a way I can do it please let me know. Thanks again.

[sycamore]

Can the moderators close this thread please? Thank you.

Edit > if there is a way I can do it please let me know. Thanks again.

There's a way to directly notify the moderators. At the top of each post is a set of three icons. The leftmost one is an exclamation point. Click it. You'll see a "Reason" dropdown -- change it to the last option. Then enter your request to have the thread locked in the text box.

[tibbitts]

Can the moderators close this thread please? Thank you.

Edit > if there is a way I can do it please let me know. Thanks again.

You can't close a thread but can delete the content from your personal contributions (but not quoted portions that appear in other contributions.) Why would you want to close the thread? Threads are normally never closed. Threads sometimes come back to life after many years and that's sometimes educational.

[bikefish]

The proper term I should have used is “closed”. I submitted my reason to the moderator.

[LadyGeek]

^^^ Thanks to both.

Moderators also read threads but we very much appreciate the members who report posts using the (report post) in the top-right corner of the post. Thank you to the members who do just that.

We don't close ("lock") threads unless they violate forum policy or the discussion has become unfocused and unproductive. You never know what someone might contribute to the discussion later on. Let's keep going.

To help new investors, can someone provide an example of what "inflow" and "outflow" mean? It's not like trading a stock, which is a zero-sum game. Please supply a simple example. What is bought / sold / redeemed?

[vriguy1]

I've held all these funds over the last decade or two - but gradually migrated towards VTI/VOO for my domestic equity component as I concluded that the active management did not really add enough value to justify their (low) fees. And for the bond portion for VWELX/VWINX, I decided I wanted Inflation indexed bonds - not a corporate/Treasury mix. Plus I wanted some foreign equity (VXUS/VEA). A few years after exiting, I have no regrets.

[Hacksawdave]

To help new investors, can someone provide an example of what "inflow" and "outflow" mean? It's not like trading a stock, which is a zero-sum game. Please supply a simple example. What is bought / sold / redeemed?

Flows are measured by a time period based upon the share turnover transacted. It is based upon three types of transaction to equate a net increase in share count (inflow) versus a net share decrease (outflow) count since the last measurement period.

New shares, minus redeemed shares, equate to a positive or negative share count number change. A positive new share count change equates to fund inflows. A negative share count change equates to fund outflows.

Some third parties and fund companies will disclose these numbers as an overall picture or by fund. A fund's annual and semi-annual reports will usually account for these in the capital shares transaction section of the financial statements portion of the report.


The three types of share transactions are:

• New shares purchased.
• New shares issued in lieu of cash distribution (reinvestment)
• Redeemed shares (sold via sale redemption or exchange to another fund)

An example:

New shares purchased: 100,000.
New shares issued in lieu of cash distribution: 10,000.
Shares redeemed: 60,000.

This gives a positive share change of 50,000 purchased shares, an inflow for the fund.

[prioritarian]

Bogle warned about ETFs, he was right...if you give people the chance to play portfolio manager they will do so.

One could play portfolio manager long before ETFs were first created.

It's just as easy to market time with mutual funds. For example, Bogle played portfolio manager with his mutual funds by selling equities prior to the 2008.

[LadyGeek]

To help new investors, can someone provide an example of what "inflow" and "outflow" mean? It's not like trading a stock, which is a zero-sum game. Please supply a simple example. What is bought / sold / redeemed?

Flows are measured by a time period based upon the share turnover transacted. It is based upon three types of transaction to equate a net increase in share count (inflow) versus a net share decrease (outflow) count since the last measurement period.

New shares, minus redeemed shares, equate to a positive or negative share count number change. A positive new share count change equates to fund inflows. A negative share count change equates to fund outflows.

Some third parties and fund companies will disclose these numbers as an overall picture or by fund. A fund's annual and semi-annual reports will usually account for these in the capital shares transaction section of the financial statements portion of the report.


The three types of share transactions are:

• New shares purchased.
• New shares issued in lieu of cash distribution (reinvestment)
• Redeemed shares (sold via sale redemption or exchange to another fund)

An example:

New shares purchased: 100,000.
New shares issued in lieu of cash distribution: 10,000.
Shares redeemed: 60,000.

This gives a positive share change of 50,000 purchased shares, an inflow for the fund.

Thank you! I was missing that the funds themselves can create or redeem shares. Your example now makes perfect sense.

From Mutual Funds | FINRA.org. I underlined the important point.

Investment companies can be structured as either open-end or closed-end funds—although most investment companies are open-end funds, known more commonly as mutual funds. One of the key distinguishing features of a mutual fund is that investors can buy and sell shares at any time. The fund will create new shares to meet increased demand and buy back shares from investors who want to sell. Sometimes, mutual funds get so large that they close to new investors. Even if a mutual fund is closed, however, it still remains an open-end fund since existing shareholders can continue to buy and sell fund shares.

[goblue100]

I picked up a lot of info about the Star fund, which my wife owns, that I would have missed without this thread. So thanks to OP and the users who posted the Star info and links.