Vanguard 2013 brokerage commission expense

Mutual funds that buy and sell stock incur brokerage commissions on these transactions. This transactional cost is not included in a fund's expense ratio, but the cost is reported in a fund's annual statement of additional information to the fund prospectus. Additional fund transactions costs, such as spread costs and market impact costs can be much higher than brokerage expense, but these costs are not reported and must be estimated.

Brokerage commission expense

The tables below provide Vanguard passive and active fund brokerage expense for 2013, both in absolute dollars and as a "commission ratio" (brokerage commission divided by average net assets). The tables are divided among index and passive tax-managed stock funds and actively managed stock funds. In 2013 passive funds brokerage expense averaged nil (range: nil to .024%), compared to active expense of 0.06% (range .01% to 0.20%).

In 2013 Vanguard implemented benchmark index changes for funds formerly benchmarked to MSCI indexes. This resulted in increased brokerage commission expenses for Vanguard passively managed funds during the fiscal year (overall passive fund brokerage commission expense in 2013 came to $50,951,00 compared to the 2012 $26,242,000 expense).[note 1]

Vanguard Fund Brokerage Commission Expense (2013)
Passive Funds [1]
Fund Brokerage commission
$
Commission ratio
Pct.
Annual change
Vanguard 500 Index $1,008,000 .001% .000%
Vanguard Dividend Appreciation Index $250,000 .001% .000%
Vanguard Extended Market Index $1,303,000 .004% -.001%
Vanguard FTSE Social Index $17,000 .002% .000%
Vanguard Growth Index $830,000 .003% .001%
Vanguard High Yield Dividend Index[note 2] $204,000 .003% .001%
Vanguard Large-Cap[note 3] $58,000 .001% -.001%
Vanguard Mid-Cap Index $2,370,000 .006% .003%
Vanguard Mid-Cap Growth Index $207,000 .006% .002%
Vanguard Mid-Cap Value Index $233,000 .007% .000%
Vanguard REIT Index $988,000 .003% -.001%
Vanguard Small-Cap Index $4,451,000 .012% .007%
Vanguard Small-Cap Growth Index $780,000 .015% .006%
Vanguard Small-Cap Value $1,349,000 .013% .008%
Vanguard Tax-Managed Capital Appreciation $61,000 .001% .000%
Vanguard Tax-Managed Small-Cap $241,000 .009% -.004%
Vanguard Total Stock Market Index $5,089,000 .002% .000%
Vanguard Value Index $830,000 .002% .000%
Vanguard Developed Market Index $914,000 .007% .000%
Vanguard Emerging Markets Stock Index $17,176,000 .024% .015%
Vanguard European Stock Index $674,000 .006% .003%
Vanguard FTSE All-World ex-US Index $685,000 .004% .000%
Vanguard FTSE All-World ex-US Small Cap $115,000 .007% -.001%
Vanguard Global ex-US Real Estate $138,000 .018% -.003%
Vanguard Pacific Stock Index $378,000 .008% .006%
Vanguard Tax-Managed International $1,108,000 .007% .003%
Vanguard Total International Stock Index $8,716,000 .001% .000%
Vanguard Total World Stock Index $181,000 .013% -.004%


Vanguard Fund Brokerage Commission Expense (2013)
Active Funds [1]
Fund Brokerage commission
$
Commission ratio
Pct.
Annual change
Vanguard Capital $1,506,000 0.02% -0.01%
Vanguard Capital Value $1,796,000 0.20% 0.01%
Vanguard Dividend Growth[note 4] $2,340,000 0.01% 0.00%
Vanguard Energy $4,904,000 0.04% 0.00%
Vanguard Equity Income $2,331,000 0.02% -0.01%
Vanguard Explorer $11,776,000 0.12% 0.00%
Vanguard Explorer Value[note 5] $168,000 0.16% 0.02%
Vanguard Growth & Income $912,000 0.02% -0.01%
Vanguard Growth Equity $283,000 0.04% -0.01%
Vanguard Health Care $1,673,000 0.01% 0.00%
Vanguard Mid Cap Growth $3,615,000 0.14% -0.01%
Vanguard Morgan Growth $2,996,000 0.03% 0.00%
Vanguard Precious Metals & Mining $2,325,000 0.09% 0.03%
Vanguard Primecap Core $850,000 0.02% -0.01%
Vanguard Primecap $3,956,000 0.01% 0.00%
Vanguard Selected Value $3,665,000 0.07% 0.02%
Vanguard Strategic Equity[note 6] $651,000 0.02% -0.03%
Vanguard Strategic Small Cap $86,000 0.03% -0.02%
Vanguard U.S. Growth $1,079,000 0.03% -0.01%
Vanguard U.S. Value $133,000 0.02% -0.01%
Vanguard Windsor $6,908,000 0.05% -0.03%
Vanguard Windsor II[note 7] $14,842,000 0.04% 0.01%
Vanguard Emerging Market Select[note 8] $334,000 0.12% 0.01%
Vanguard Global Equity $3,031,000 0.07% 0.01%
Vanguard International Explorer $2,317,000 0.12% 0.00%
Vanguard International Growth $12,048,000 0.06% 0.00%
Vanguard International Value $6,537,000 0.10% -0.01%

Balanced funds and fund of funds

Main article: Balanced fund

Balanced mutual funds which buy and sell individual stocks pay brokerage commissions on the stock portion of the portfolio. A fund of funds does not ordinarily pay brokerage commissions on its buys and sells of the underlying mutual fund portfolios; but a fund of funds does incur brokerage expense for its purchases or sales of an ETF. In 2013 only the Vanguard Target Retirement Income fund incurred brokerage commission expense for ETF transactions. [2] Balanced fund commission expense in 2013 was very low (ranging from nil to .019%). Keep in mind that a fund of funds will also bear the commission brokerage costs of the underlying portfolios.

Vanguard balanced fund of funds include the series of Lifestrategy funds; the series of target retirement funds; the series of Managed Payout funds; and the STAR fund. The majority of Vanguard balanced funds are indexed, or mostly indexed. Active balanced funds include the STAR, Wellesley, and Wellington funds.


Vanguard Fund Brokerage Commission Expense (2013)
Balanced Funds [1]
Fund Brokerage commission
$
Commission ratio
Pct.
Annual change
Vanguard Balanced Index $207,000 .001% .000%
Vanguard LifeStrategy Conservative $0 .000% .000%
Vanguard LifeStrategy Growth $0 .000% .000%
Vanguard LifeStrategy Income $0 .000% .000%
Vanguard LifeStrategy Moderate $0 .000% .000%
Vanguard Managed Payout Distribution $3000 .001% -.001%
Vanguard Managed Payout Growth & Distribution $0 .000% -.002%
Vanguard Managed Payout Growth $0 .000% -.001%
Vanguard STAR $0 .000% .000%
Vanguard Target Retirement 2010 $0 .000% .000%
Vanguard Target Retirement 2015 $0 .000% .000%
Vanguard Target Retirement 2020 $0 .000% .000%
Vanguard Target Retirement 2025 $0 .000% .000%
Vanguard Target Retirement 2030 $0 .000% .000%
Vanguard Target Retirement 2035 $0 .000% .000%
Vanguard Target Retirement 2040 $0 .000% .000%
Vanguard Target Retirement 2045 $0 .000% .000%
Vanguard Target Retirement 2050 $0 .000% .000%
Vanguard Target Retirement 2055 $0 .000% .000%
Vanguard Target Retirement 2060 $0 .000% .000%
Vanguard Target Retirement Income $999 .000% .000%
Vanguard Tax- Managed Balanced [note 9] $7,000 .001% .000%
Vanguard Wellesley $2,186,000 .006% -.004%
Vanguard Wellington $13,836,000 .019% .000%

Factors determining brokerage expense

Vanguard provides notes in the statement of additional information that attribute reasons behind higher and lower levels of brokerage expense for a given fund[/s]. Factors can include:

  • An increase or decrease in fund turnover;
  • An increase in shareholder flows into or out of the portfolio;
  • An increase or decrease in market volatility.

A new fund, with low net assets, will often have a higher than average "commission ratio" than similar funds with higher asset bases.

Data spreadsheets

Multiple year brokerage expense data is available in the spreadsheet tables below.

Passive table

(View Google Spreadsheet in browser, then File --> Download as to download the file.)
Active table

(View Google Spreadsheet in browser, then File --> Download as to download the file.)
Balanced table

(View Google Spreadsheet in browser, then File --> Download as to download the file.)

Notes

  1. Portfolio rebalancing in response to a benchmark index change resulted in higher brokerage commissions for the following funds during the fiscal year ended December 31, 2013:
    • Growth Index Fund
    • Mid-Cap Index Fund
    • Mid-Cap Growth Index Fund
    • Mid-Cap Value Index Fund
    • Small-Cap Index Fund
    • Small-Cap Growth Index Fund
    • Small-Cap Value Index Fund
    • Emerging Market Stock Index Fund
    • European Stock Index Fund
    • Pacific Stock Index Fund
    • Tax-Managed International Fund
    • Total International Stock Index Fund
  2. The increase in brokerage commissions for the fiscal year ended October 31, 2013, was attributable to greater cash flow into the Vanguard High Dividend Yield Index Fund and index rebalancing due to changes in the Fund’s target index.
  3. Lower cash flow into the Vanguard Large Cap Index Fund during the fiscal year ended December 31, 2013, resulted in less frequent portfolio transactions, which led to a decrease in brokerage commissions for the year.
  4. Vanguard Dividend Growth Fund: Significant cash flow into the Fund during the fiscal year ended January 31, 2013, resulted in more frequent portfolio transactions and led to an increase in brokerage commissions for the year.
  5. Vanguard Explorer Value Fund: The brokerage commissions paid by the Fund during the fiscal year ended August 31, 2013, increased proportionately with the growth of the Fund
  6. Vanguard Strategic Equity Fund: Lower brokerage commissions paid during the fiscal year ended September 30, 2013, were due to a change in the advisor’s trading strategy that resulted in the decrease of explicit brokerage commissions.
  7. Vanguard Windsor II Fund: Increased trading activity during the fiscal year ended October 31, 2013, resulted in higher turnover, which led to an increase in brokerage commissions for the year.
  8. Vanguard Emerging Market Select Fund: Significant cash flow into the Fund during the fiscal year ended October 31, 2013, resulted in more frequent portfolio transactions and led to an increase in brokerage commissions for the year.
  9. Cash flow volatility during the fiscal years ended December 31, 2012 and 2013, resulted in more or less frequent trading within the Vanguard Tax- Managed Balanced Fund’s portfolio and, therefore, higher or lower brokerage commissions for those periods.

See also

References

  1. 1.0 1.1 1.2 Data sources: EDGAR, commission data from statements of additional information forms 485BPOS; average net asset data from forms NSAR.
  2. See, statement of additional information for the Chester funds, Prospectus filings , retrieved 18 May, 2013.