Benchmarking managed payout funds

In the Vanguard Managed Payout Funds 2008 semiannual report the firm made the following comments regarding benchmarking the Managed Payout Funds:

The Managed Payout Funds seek to make monthly cash distributions while providing different levels of long-term inflation protection and capital appreciation.

Over time, a sensible benchmarking approach will include multiple measures, such as a fund’s performance relative to:


 * An inflation-based or absolute-return target, consistent with the fund’s goal of providing long-term inflation protection or a particular nominal payout rate.


 * A so-called policy portfolio (that is, a long-term strategic asset allocation) that, in the board of trustees’ judgment, is consistent with the fund’s objective. A fund’s performance relative to a policy portfolio can highlight the effectiveness of any decisions to deviate from the benchmark.
 * A peer group of funds with similar objectives (if an appropriate one exists).

Managed fund payouts
The Vanguard Managed Payout funds distribute income monthly according to a managed distribution policy. Vanguard reports the history of fund income payouts, indicated in the tables below. Inflation, as measured by the CPI-U, is also provided.

Policy portfolio
Vanguard benchmarks each Managed Payout Fund to the following policy benchmarks: