VG changes to index benchmarks

[BOBOT]

I have no idea what these changes mean for fund owners. How will the actual assets held differ? From what I understand the changes will mostly be to the trading protocols.

I guess I'll just trust VG to look out for us.......

 

[FinanceDude]

So, now VG is going to follow benchmarks that no other major mutual fund widely uses? The average person has never heard of those benchmarks. It does seem curious, there has to be more to the story.............

 

[samclem]

This is similar to the change Vanguard made in 2005, when they stopped using indices licensed by Dow Jones and adopted ones licensed by MSCI.

Here's an article written at the time of that change. The change was made without any problems as far as I know.

The present change is being made for the same stated reason--Vanguard wants to pay lower licensing fees. It sounds like they locked in a very long-term deal with the Univ of Chicago for use of the new benchmarks. In addition, if the new indices will reduce the amount of trading required by fund managers (as Vanguard claims they'll do), that will reduce costs.

Still---with all the recently unearthed deals (manipulation of LIBOR, etc), I'm probably not the only one who wonders if there's not the potential for "influence" in the selection of stocks to join/be dropped from various benchmarks. As indexing has gained popularity, having your company's stock included in a popular index creates instant demand for it, increasing the stock price. That might be worth a donation to an individual or institution to assure "fair" treatment.

 

[gerntz]

Perhaps I'm wrong, but it strikes me as moving towards what DFA does with their funds of trying to optimize return in a given market segment without (well known) indexing & thus not needing to buy/sell exactly as the index does. What VG has chosen to do isn't the same but lowers costs as DFA's method do.