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Vanguard to offer international small-cap index fund

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US exchange-traded and mutual fund provider Vanguard has filed a registration statement with the Securities and Exchange Commission for its first international small-cap index fund.
US exchange-traded and mutual fund provider Vanguard has filed a registration statement with the Securities and Exchange Commission for its first international small-cap index fund.

The Vanguard FTSE All-World ex-US Small-Cap Index Fund will offer investor shares, institutional shares and ETF Shares, and is expected to be available in the first quarter of 2009.

The target benchmark for the fund is the FTSE Global Small Cap ex-US Index, a market-capitalisation-weighted index of stocks traded on markets outside the US. The fund will invest in a broadly diversified sampling of securities from the benchmark, which comprises more than 3,300 stocks of companies in 47 countries.

‘Vanguard’s current line-up of international and global index funds provides exposure to large- and mid-cap stocks,’ says Vanguard chief investment officer Gus Sauter. ‘The new small-cap fund will enable investors further to diversify their portfolios to gain complete exposure to international markets via a passively-managed vehicle.’

The fund’s ETF Shares have an estimated expense ratio of 0.38 per cent. The investor shares, which will require a USD3,000 minimum initial investment, have an estimated expense ratio of 0.60 per cent, while the institutional shares have an estimated expense ratio of 0.35 per cent and a USD5m minimum initial investment requirement.

To help defray the transaction costs associated with investing in small-cap international stocks, the fund will levy a 0.75 per cent fee on purchases and redemptions of the investor and institutional shares.

Headquartered in Valley Forge, Pennsylvania, Vanguard is one of the world’s largest investment management companies and a provider of company-sponsored retirement plan services. Vanguard manages more than USD1trn in US mutual fund assets, including nearly USD460 billion in retirement assets, and offers more than 150 funds to US investors and more than 50 further outside the US.

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