nvestors seeking to buy shares of Vanguard's High Yield Corporate Bond Fund
had better find an alternative for their cash. The Valley Forge, Pennsylvania-based fund complex today temporarily closed the doors to its quick-selling bond fund.
Investors throwing cash at the fund at nearly twice the rate of last year. The fund has $9.2 billion in assets and has seen $1.4 billion in net cash inflows so far in 2003. The fund has proven popular with investors seeking dividends. The fund has a higher-dividend than other, shorter maturity funds. It has also returned 9.9 percent so far this year.
The fund is sub-advised by Wellington Management
, which says it has not experienced any issues with finding ways to invest the incoming cash for the fund.
Vanguard officials characterizes the closing a "cooling-off" period. The chill started with the close of the stock exchanges at 4:00 pm today. New shareholders are being turned away and existing shareholders in the fund are limited to additional purchases of just $100,000 per year.
The cooling off period will last at least three months. However, the fund's trustees say that they will not re-open the fund until they have determined that "the unusually high level of investor interest in the Fund has subsided and cash flows have moderated."
"Investors continue to commit considerable assets to our fixed income funds and, in particular, Vanguard High-Yield Corporate Fund, despite our ongoing educational efforts focusing on bond risks," said Vanguard Chairman John J. Brennan
as explanation for the closing. "The performance of the lower quality corporate issues has been quite strong this year, enticing investors to high-yield funds in great numbers."
Brennan added that investors should not read the closing of the fund as a recommendation to sell bond funds or forgo future purchases. "Bonds remain an appropriate part of a well-balanced, diversified program of a long-term investor who is aware of the accompanying risks," said Brennan.
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