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Vanguard lowers expenses by merging target-date funds

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Vanguard Group Inc. is merging its institutional target-date funds into its Target Retirement Funds family, which it expects will result in lowering the funds’ expense ratios to 0.08%.

The average expense ratio of TRF funds currently is 0.12%, according to the company’s website, which says the industry average expense ratio for comparable target-date funds is 0.55%.

In addition to lowering expense ratios, Vanguard said the move will lower its minimum investment requirement for the Vanguard Target Retirement Trust II program to $100 million from $250 million. In addition, it said it will launch a Vanguard Target Retirement Income and Growth Trust for each of its Target Retirement Trust programs. The new trust’s higher (50%) equity allocation in retirement is intended for participants whose wealth, risk tolerance, and/or additional sources of income allow for higher discretionary spending in retirement, the company said in a release.

The TRF mergers are expected to be completed in February 2022. The merged funds will retain the same investment strategy, asset allocations and glide path.

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