Vanguard's $100M Mistake
Welcome to this week's News Brief, a roundup of some of Ignites' top stories of the past week.
Vanguard?was ordered to repay more than $90 million to certain target-date fund investors who allegedly suffered a tax hit after the Malvern, Pennsylvania-based fund giant lowered the barrier to access for a sister series, Ignites'?Beagan Wilcox Volz?reported. Investors fled the investor series of the firm's Target Retirement Funds after Vanguard slashed the minimum investment required for institutional series access by 95%, to $5 million, the?Securities and Exchange Commission?said Friday.
To meet the redemptions, the investor series had to sell underlying holdings with high valuations, so investor series shareholders who remained in the fund and who held their shares in taxable accounts got hit with?large capital gains distributions. In all, about 40% of the fund's assets were held in non-tax-qualified accounts. In addition to paying those damaged, the SEC also ordered Vanguard to pay a $13.5 million fine over the matter.
Also last week,?BlackRock?executives?said?that the firm is looking into ways it can add private-market assets to it target-date funds. "We think the same innovations that powered [retirement-income-focused product] LifePath Paycheck could ultimately power a target-date structure, with private markets and alternatives as part of the glide path," a company executive told analysts last week. The firm is also looking to add private assets into managed accounts and model portfolios,?Brian Ponte?reported.
And in other BlackRock news,?Mark Wiedman?announced he will?leave?his role as the firm's global client head. He seeks to get back to his "entrepreneurial roots," he wrote in a?LinkedIn?post. Wiedman has spent 20 years at the firm and had been considered a potential successor to Chief Executive?Larry Fink,?Joe Morris?reported. Wiedman plans to stay at the world's biggest asset manager through the spring, he said. In the wake of his resignation, BlackRock has?handed?new responsibilities to four executives.
Inside the Wrapper
Join us on Thursday, Jan. 30, for our next?webcast, "Inside the Wrapper: How Shops Are Responding to Demand for Private Credit." As interest in private credit surges, shops are exploring ways to offer access to retail investors. Panelists from?Calamos?and?Broadridge?will discuss retail appetite for private credit, the vehicles that provide access, and budding partnerships between asset managers and private-credit firms.?Register here.
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Active Hemorrhaging
Investors?yanked?$332.4 billion from active mutual funds sponsored by 10 fund companies during the first 11 months of 2024,?Morningstar Direct?data shows. Those firms' outflows represented 85% of net redemptions from all active mutual funds,?Daniel Gil?reported.
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