Vanguard Adds New Actively Managed Stock Fund

A press release said the fund is expected to hold a portfolio of fewer than 200 securities, and to maintain valuation measures and an average market capitalization comparable to its benchmark index, the Russell 2500 Value Index. The fund is now accepting investments during a two-week subscription period that is expected to conclude on March 30, 2010.      

Vanguard Explorer Value Fund requires a minimum initial investment of $10,000, and the fund is expected to have an expense ratio of 0.59%.      

According to the announcement, following the subscription period, fund assets will be divided equally among three advisory firms:

• Cardinal Capital Management, L.L.C. is a Connecticut-based investment adviser that manages small- and mid-cap value portfolios. Cardinal Capital believes that a company’s stock price is ultimately determined by its ability to generate excess cash flow and reinvest the cash to increase shareholder value. The firm, founded in 1995, has $1.1 billion in assets under management.
• Sterling Capital Management LLC, based in North Carolina, uses a value-oriented strategy that finds stocks of quality companies selling at large discounts compared to the underlying value of the business. Sterling defines quality companies as those that generate considerable cash flow, offer reinvestment opportunities with attractive returns, and enjoy competitive advantages in their business sector. Founded in 1970, Sterling manages $12 billion in assets.
• Frontier Capital Management Co., LLC is a Boston-based investment manager with a history of investing in small- and mid-cap stocks. Frontier selects stocks by identifying companies they believe are underpriced relative to their long-term value. These companies generally are inexpensive in many ways, including price-to-book and price-to-earnings ratios. Founded in 1980, the firm manages more than $6 billion in assets.