Vanguard Closes Its High-Yield Corporate Fund

The fund, which has $16.9 billion in net assets, is being closed to curtail strong cash inflows. It has experienced cash inflows totaling $2 billion over the past six months.

“In this prolonged low-rate environment, we continue to see investors turn to high-yielding alternatives— including money market fund holders moving to bond funds, U.S. Treasury bond fund holders moving to high-yield corporate funds, and bond fund holders moving to dividend-paying stock funds.  And we’ve cautioned investors accordingly about reaching for yield,” said Vanguard CEO Bill McNabb. “The flows into the High Yield Corporate Fund have been particularly acute, so we are taking these proactive steps to preserve the ability of the adviser to manage the fund effectively and protect the interests of existing shareholders.”

Vanguard says existing shareholders can make additional purchases without limit.

The company last closed the fund in June 2003 after it received $1.4 billion in net cash flow in the first five months of the year. Vanguard reopened the fund in December 2003 after investor interest and cash flow had subsided.

Jay Polansky