Did Your Vanguard Expenses Go Down? May 11, 2012 Adviser Fund Update Print Fidelity Shuffles Managers Fidelity announced several portfolio manager changes over the past month. The most notable change occurred at Fidelity Mid Cap Growth and Advisor Growth Strategies, where Steve Calhoun has been replaced by Fidelity’s StockA financial instrument giving the holder a proportion of the ownership and earnings of a company. Selector Mid Cap team. The team includes Douglas Simmons, Samuel J. Wald, Pierre Sorel, Patrick Venanzi, Rayna Lesser Hannaway, Mahantesh Kori, Shadman Riaz and Gordon Scott, each of whom will manage sector-specific sleeves of the portfolio. Historically, most Fidelity funds have been run by a lone named manager, but this latest change shows that Fidelity is open to a more team-based approach at some funds. Hopefully, the new team will achieve better results, as Mid Cap Growth has trailed its benchmark, the Russell Midcap Growth Index, over the past one-year, three-year, five-year and 10-year periods. Calhoun has also been relieved of his duties as manager of Growth Strategies and VIP Growth Strategies, which has also trailed its benchmark for some time. Taking Calhoun’s place is Christopher T. Lee, who joined Fidelity in 2004 as an equityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. analyst for the semiconductor industry. Lee was later appointed manager of Select Electronics and Select Consumer Finance, both of which he will continue to co-manage. Joining Lee as co-manager of Select Consumer Finance is Shilpa M. Mehra, who had been covering commercial services stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. for Fidelity since 2009. More recently, she served as a research analyst covering the financial services industry. In another Select fund manager change (a common occurrence at Fidelity, which uses the Select funds as a stepping stone for up-and-coming talent in its in-house manager training regimen), Gordon Scott has taken the helm at Select Consumer Discretionary and VIP Consumer Discretionary, succeeding John Harris. Scott began his career at Fidelity in 2005 as a research associate covering transportation and machinery stocks and later covered a broad range of stocks within the consumer sector. In 2011, Scott was named co-manager of Advisor Stock Selector Mid Cap, which he continues to manage. Over at Europe Fund, Risteard Hogan has taken over portfolio management duties from Melissa Reilly, who will continue to manage Europe Capital Appreciation, Advisor Europe Capital Appreciation and the European equity subportfolio of Global Balanced. Europe has trailed its benchmark, the MSCI Europe Index, slightly over the one-year and three-year periods, but has outperformed it over the five-year and 10-year periods. Hogan joined Fidelity in 2005 as a research analyst and moved to his current position in the International EquityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. Research division in 2006. Previously, he managed consumer staples and financial subportfolios for Fidelity between 2008 to 2011. Prior to joining Fidelity, Hogan conducted fundamental research on the European financials, international chemicals and building materials industries for Fidelity Worldwide Investment, which operates independently from Fidelity. Vanguard Cuts Expenses on More Funds Following up on last month’s expense ratio adjustments for a number of its funds and ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., Vanguard has reduced expenses on various share classes of 27 additional funds and ETFs (with one increase thrown in for good measure). The reductions range from as little as one basis point (0.01%) to nine basis points (0.09%). The sole increase was at Conservative Allocation AnnuityA financial instrument that pays the holder a guaranteed stream of payments. The annuity is funded by either a lump sum (one-time) or a series of deposits. Once funded, the sum is invested by the insurance company who sold the annuity (the accumulations phase). After a certain trigger (for example, the holder’s retirement or reaching a certain age) payments begin to be issued to the holder (annuitization phase). Annuity payments may be fixed or variable in both amount and in length (some pay out for a designated span of years, others until the holder’s death)., which saw expenses go from 0.20% to 0.25%. The cuts are good news for shareholders, because even small reductions in expenses can add up to significant savings over longer periods of time (for more of the math behind expenses, see our Adviser Fund Update from April 13 by clicking here). Expressed as a percentage of assets under management, the expense ratio tells you how much you are paying to support the firm’s annual cost of operating a particular fund or ETFA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index.. These expenses are deducted from the fund’s or ETF’s assets and therefore reduce your returns. At Adviser Investments, fund expenses have always been taken into account in our analysis of potential funds for our client portfolios. We believe that, all other factors being equal, a fund with lower expenses will deliver better long-term results. But it’s important to remember that expense ratios are just one factor that we consider when sizing up potential funds for our clients. We believe the most important factor is the fund manager, because behind every mutual fund is a living, breathing person with talents, biases and a track record. We make it our business to know the fund managers, their styles and their histories better than anyone else in the field. That’s why our approach is to “buy the manager, not the fund.” Below are the new expense ratios for the Vanguard funds and ETFs affected by the most recent changes: Fund Share Class Old Expense Ratio New Expense Ratio Inflation-Protected Securities Investor 0.22% 0.20% Total BondA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. Market Index Admiral 0.11% 0.10% Total Bond Market Index ETF 0.11% 0.10% 500 Index Admiral 0.06% 0.05% 500 Index ETF 0.06% 0.05% Balanced Index Admiral 0.12% 0.10% Balanced Index Investor 0.26% 0.24% Extended Market Index Admiral 0.16% 0.14% Extended Market Index ETF 0.16% 0.14% Extended Market Index Investor 0.30% 0.28% Growth Index Admiral 0.12% 0.10% Growth Index ETF 0.12% 0.10% Growth Index Investor 0.26% 0.24% Large-Cap Index Admiral 0.12% 0.10% Large-Cap Index ETF 0.12% 0.10% Large-Cap Index Investor 0.26% 0.24% Mid-Cap Growth Index ETF 0.12% 0.10% Mid-Cap Growth Index Investor 0.26% 0.24% Mid-Cap Index Admiral 0.12% 0.10% Mid-Cap Index ETF 0.12% 0.10% Mid-Cap Index Investor 0.26% 0.24% Mid-Cap Value Index ETF 0.12% 0.10% Mid-Cap Value Index Investor 0.26% 0.24% Small-Cap Growth Index ETF 0.12% 0.10% Small-Cap Growth Index Investor 0.26% 0.24% Small-Cap Index Admiral 0.17% 0.16% Small-Cap Index ETF 0.17% 0.16% Small-Cap Index Investor 0.31% 0.30% Small-Cap Value Index ETF 0.23% 0.21% Small-Cap Value Index Investor 0.37% 0.35% Tax-Managed Balanced Admiral 0.15% 0.12% Tax-Managed International Admiral 0.18% 0.12% Tax-Managed Small-Cap Admiral 0.18% 0.13% Total Stock Market Index Admiral 0.07% 0.06% Total Stock Market Index ETF 0.07% 0.06% Value Index Admiral 0.12% 0.10% Value Index ETF 0.12% 0.10% Value Index Investor 0.26% 0.24% Balanced Annuity — 0.30% 0.29% Capital Growth Annuity — 0.44% 0.42% Conservative Allocation Annuity — 0.20% 0.25% Diversified Value Annuity — 0.40% 0.39% Equity Income Annuity — 0.35% 0.33% Equity Index Annuity — 0.19% 0.17% Mid-Cap Index Annuity — 0.28% 0.26% REIT Index Annuity — 0.30% 0.28% Total Stock Market Index Annuity — 0.20% 0.18% Market Neutral Investor 1.80% 1.71% Source: Vanguard About Adviser Investments Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFs, fixed-income investing, tactical strategies and financial planning. 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