MutualFundWire.com: McNabb Says Benchmark Switch Was Smart

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Wednesday, July 10, 2013

McNabb Says Benchmark Switch Was Smart

Reuters ran an exclusive featuring an interview with Vanguard[profile]'s CEO William McNabb, who declared that the company has accumulated $40 billion in net assets from funds that switched away from benchmarks by MSCI. Vanguard announced the benchmark change in October of last year.

"If you take those 22 funds, $40 billion has been accumulated during the first half of 2013," McNabb told Reuters. "We think people are accepting the change. It hasn't been the drag that a lot of people predicted it would be."

Vanguard shifted six international stock funds with $170 billion in assets to track index from the FTSE Group, and 16 U.S. stocks and balanced funds that have $367 billion of assets, including the Vanguard Total Stock Market ETF, switched to indexes operated by the University of Chicago's Center for Research in Security Prices (CRSP), Tim McLaughlin wrote. This recent announcement comes not long after Lipper data showed Vanguard had $9.7 billion in net outflows for bond funds June and $400 million in outflows from balanced funds. McNabb indicated the losses were slightly self-inflicted, however:

McNabb said the company's strident warnings to investors about bond risks have played a part in slowing down the money going into those investments.

"Money has left, but at a less frantic pace," McNabb said. "People have certainly reacted to changes in the bond market. Money is moving from bonds into money funds with basically no yield."