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Vanguard spreads savings: investors keep over $8.6 million

Vanguard | 21 March 2011


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Investors in Vanguard’s wholesale index funds saved $8,685,580 in 2010 through ‘crossing savings’, or reduced spread costs.

A crossing or 'special spread' saving occurs when monies to be invested in a Vanguard fund are used to meet client withdrawals received on the same day so Vanguard does not need to transact securities on-market and therefore saves on trading costs.

Vanguard investors benefit directly from the savings. Each investor who buys or sells Vanguard units on the day a crossing occurs receives a saving by way of a reduction in the normal buy and sell spreads.

Buy and sell spreads represent the costs the Vanguard fund experiences when buying or selling investments such as brokerage, custody fees and market impact. The spreads protect existing investors from the costs associated with the transaction activity of other investors.

“Vanguard is committed to the benefits of low cost investment and this is one way for us to act on this promise to clients” said Geoff Diamond, Principal, Institutional.

“Vanguard passes these cost savings directly onto those investors who generate the crossing opportunities. We reduce the spreads when a crossing of $500,000 or more occurs in a wholesale index fund” he said.

While normal crossings will continue to occur on other business days, clients can use the monthly crossing days identified to try and increase the possibility of saving by timing their transactions to occur on that day.