Investment giant Vanguard has entered the mutual-fund industry in Canada, with a suite of four actively managed mutual funds that offer significantly lower management costs than what has been traditionally offered in the Canadian marketplace.
Vanguard Investments Canada Inc. on Monday launched four global investment strategies available for Canadian investors to purchase through their financial advisers or on certain discount brokerages. They are: the Vanguard Global Balanced Fund, the Vanguard Global Dividend Fund, the Vanguard U.S. Value Windsor Fund and the Vanguard International Growth Fund.
The funds are available as F-series funds, meaning only for those investors with fee-based accounts (which do not include embedded commissions for advisers.) Fee-based clients typically pay their advisory firms 1 per cent to 1.5 per cent of the value of their account a year.
Currently, self-directed investors can purchase the funds on two discount brokeragers: Questrade and Qtrade Investor.
There is also an I series for institutional investors.
Vanguard is already well known to Canadian exchange-traded fund investors, with $16-billion in 36 ETFs listed on the TSX. Canadians also hold another $12-billion in U.S.-listed Vanguard products.
The new Canadian mutual funds will provide global investment strategies from some of Vanguard’s longest-tenured sub-advisors and aim to complement the firm’s existing ETF lineup.
“Given our growth and popularity with Canadian ETF investors over the past seven years, we feel the time is right to launch mutual funds,” Atul Tiwari, managing director of Vanguard Investments Canada Inc., told The Globe and Mail. “We brought the Vanguard effect to ETFs and we believe that the Canadian mutual-fund industry could benefit from some price competition as well.”
The company claims to have had a big influence on fees in Canada: Since 2011, average management expense ratios (MERs) have declined in 12 of the 13 ETF categories in which the firm competes. In categories where Vanguard doesn’t compete, fees fell in five of 12 cases, according to an internal Vanguard analysis.
Management fees for the funds’ first year will vary between 0.34 per cent and 0.40 per cent – about half the cost of the mutual-fund industry average. The management fee will vary up or down over time, up to a maximum of 0.50 per cent, based on the investment performance of each fund.
“The contributing factors to successful active management are low costs, talent and patience,” Tim Huver, head of product, Vanguard Investments Canada Inc., said in a statement. “These mutual funds provide Canadians with access to proven global investment strategies in an innovative fee structure that aligns with the best interests of investors.”
The Vanguard Global Balanced Fund will look to provide long-term capital growth as well as some current income, by investing primarily in a combination of equity and fixed income securities of issuers located anywhere in the world. The fund will be sub-advised by Wellington Management Canada ULC.
The Vanguard Global Dividend Fund will invest primarily in dividend paying equity securities of global companies, aiming to give investors an above-average level of current income together with long-term capital growth. This fund will be subadvised by Wellington Management Canada ULC and The Vanguard Group Inc.
The Vanguard Windsor U.S. Value Fund will provide investors with long-term capital appreciation and income by investing mainly in large- and mid-capitalization companies located in the United States whose stocks are considered to be undervalued. This fund will be subadvised by Wellington Management Canada ULC and Pzena Investment Management LLC.
Finally, the Vanguard International Growth Fund will be investing primarily in the stocks of companies located outside Canada and the United States; and be subadvised by Baillie Gifford Overseas Limited and Schroder Investment Management North America Inc.