Vanguard Asset Management says it is closing two actively managed US equity funds to new investors to limit cash flows and protect performance.Existing shareholders can still buy more shares without limits.
The Vanguard US Discoveries Fund, managed by Granahan Investment Management, a sub-adviser of Vanguard, invests mainly in US stocks with market capitalisations of less than $700 million (€508 million) that are judged to be capable of strong growth. Benchmarked to the Russell Microcap Growth Index, the fund yielded a total return of 57% last year and had $160 million under management at the end of 2013.
The Vanguard US Opportunities Fund, managed by another sub-adviser, Primecap Management, invests primarily in small and mid-cap US stocks and is benchmarked to the Russell 3000 index. The fund's assets under management more than doubled during 2013 to $1.8 billion, during which period its total return was 50%.
“Our commitment is to protect the interests of the fund’s current shareholders and, when necessary, we take pre-emptive action to restrict cash inflows to maintain fund assets at reasonable levels,” says Thomas Rampulla, managing director for Vanguard in Europe.
Small-cap equity investment strategies often encounter capacity constraints due to the relatively low market capitalisations of the stocks they target.
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