Vanguard has come up with yet another new and creative way to semi-close funds. Investors are no longer allowed to invest more than $25,000 per year in the Windsor II Fund and the Wellington Fund, and distributors who can't track that can't sell the funds. And since TPAs, recordkeepers, and brokerages don't tend to try to limit the amount people can invest, most may be shut out altogether.

According to a spokesperson for the Valley Forge, Pennsylvania-based fund shop and provider, the booting is for the best, "in order to be equitable", as the investment cap applies to those who buy directly from Vanguard.

"Some platforms wouldn't be able to enforce those caps," Melissa Nigro told the MutualFundWire.

Vanguard announced the maximum limits for the two funds back in April, but the implications for their distribution only came to light recently. Nigro and another Vanguard spokesperson, John Demming, both describe the move as a way "to protect the interests of existing shareholders" and "keep cash flow in check." Demming even admits that the move is similar to closing the funds, but not quite there.

"Ideally," Demming told the MutualFundWire, "we'd like to keep all our funds open."

Richard Bregman, CEO and founder of MJB Asset Management LLC, is not surprised by the new rule, which he compares to the new short-term redemption fees.

"This is putting the burden on the recordkeepers," and brokerages, Bregman explained to the MutualFundWire. "Vanguard is protecting their ability to generate returns for existing shareholders."

One TPA owner is not happy in the least. Barry Kublin, president of Benefit Plans Administrators, called the move "idiosyncratic" and said that he wished Vanguard would just close the funds.

"It's insentive for fund companies to look at this stuff in a vacuum, because everybody's going to have enough to work on regarding pension reform," Kublin raged to the MutualFundWire. "What's more important?"

According to Kublin, such changes force TPAs who distribute the funds to implement both programming and education changes.

"Who's going to pay for all that?" Kublin asked. "We have to look at the rules fund companies impose and decide whether or not we're willing to support those limitations. When they're unreasonable, we get to choose which funds to support and which not." 

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