The Valley Forge based Vanguard Group launched its fourth tax-managed mutual fund, the Vanguard Tax-Managed Small-Cap Fund today.
The offering was announced early last December, and should address the need for a better small-cap fund in the shipyard. Vanguard's existing small cap fund, the Vanguard Small-Cap Index Fund (NAESX), tied to the Russell 2000, is less than satisfactory for taxable accounts, because of the high annual turnover in the Russell index component stocks.
The new fund will invest in a substantial portion of all stocks in the S&P SmallCap 600 Index, comprising stocks of smaller U.S. companies, approximating the proportions that they are represented in the Index.
The fund opens for investment today, but will have a subscription period until March 24, 1999, with all purchases invested in money market instruments until then.
The fund has a 1% front-end load with a 2% back-end load for the first year and 1% thereafter until the fifth year. The expense ratio will be 20 basis points, with a institutional share class offered at 10. Vanguard is also introducing similar institutional shares for two other tax-managed funds, the Tax-Managed Growth and Income Fund and the Tax-Managed Capital Appreciation Fund. 
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