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Rating:Will Vanguard Offer an Absolute Alternative? Not Rated 4.0 Email Routing List Email & Route  Print Print
Wednesday, January 27, 2010

Will Vanguard Offer an Absolute Alternative?

News summary by MFWire's editors

Is Vanguard Group taking a page out of Putnam's playbook? The Malvern, Pennsylvania-based fund firm has quietly started an Alternative Strategies Fund that will attempt to provide a return above the market's while have a low correlation to the index. Word of the new fund was first reported by the Independent Advisor for Vanguard Funds in an email.

Vanguard filed an exemptive application with the SEC on Wednesday afternoon that revealed details of the new fund. Vanguard officials were not immediately reached for comment.

On the surface, at least, the funds evoke the absolute return strategies Putnam rolled out in 2008 following the hiring of Bob Reynolds as CEO. Reynolds has since use the funds as a core part of Putnam's 401(k) strategy.

Meanwhile, Vanguard is planning to offer the fund as an investment for its three Managed Payout Funds that it launched in May 2008. Each of the funds would invest up to 20 percent of their assets in the Alternative Return Fund.

One wrinkle is that the Alternative Strategies Fund is registered in Ireland as a sub-fund of an umbrella fund known as Vanguard Investments Select Series I, PLC, which is organized in Ireland as a limited liability Variable Capital Corporation ("VCC").

The exemptive filing seeks the SEC's approval for the Managed Payout Funds plans to invest up to 20 percent of their assets in the new offering.

The Alternative Strategies Fund will invest using six strategies (one of which is currently inactive). It also has wide latitude to invest across asset classes and securities types, including currencies and complex securities. 

Edited by: Sean Hanna, Editor in Chief


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