Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.ibd From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Making Money In The Mutual Date: Mon, 9 Nov 92 12:21:57 EST Message-ID: <9.1992Nov9.122158@AmeriCast.com> 11/9/92 TITLE Making Money In The Mutual Vanguard Creates Two Funds Based On S&P Franklin Group, Templeton Get Shareholder OK On Merger Doug Rogers Vanguard Group's two new index mutual funds - Value Portfolio- and Growth Portfolio - are now effective. The new portfolios will track market indexes that were constructed earlier this year by Standard & Poor's Corp. in conjunction with BARRA, an invest- ment technology and consulting company. The tracking method was developed by Nobel Prize winner William F. Sharpe of Stanford University. Under Sharpe's method, the S&P 500 has been divided into two equal segments: a growth index containing those com- panies with the highest ratios of market-price-to- book-value, and a value index containing those with the lowest price- to-book ratios. "While, over time, the returns on the two indexes have been similar, the yield of the Value Index has been significantly higher than that of the Growth Index," said Vanguard Chairman John C. Bogle. "Given their differing yields and other fundamen- tal attributes, the two indexes would be appropriate considera- tions for two different investors," he continued. "We believe that the Growth Portfolio should be more suitable for investors in the accumulation phase of their investment program; the Value Portfolio should be more suitable for investors in the distribu- tion phase." Both portfolios offer what Bogle calls the "broad diversification advantage" inherent in index funds, and therefore represent "attractive alternatives" to actively managed value or growth- oriented funds. The expense ratios of the two new port- folios are expected to be 0.20%, compared with 1.30% for the average actively managed equity fund tracked by Lipper Analytical Services Inc. The portfolios also are expected to have low turn- over, leading to low transaction costs and minimal realized capi- tal gains, thus significantly lowering the immediate tax burden on fund investors. Low portfolio turnover also tends to provide a measure of tax-deferred capital growth over time, Bogle says. Investment advisory services will be provided by the Vanguard Core Management Group, which manages eight other Vanguard index funds and several indexed separate accounts, with aggregate as- sets exceeding $10 billion. "Indexing represents a major commit- ment for Vanguard," said Bogle. "And we are confident that index- ing will become a major element in the equity fund marketplace, particularly given indexing's four strengths: very low costs, re- lative performance predictability, consistency of performance, and performance superiority over time." The Vanguard Group of In- vestment Companies, headquartered in Valley Forge, Penn., is the nation's largest no-load mutual fund organization. It has more than $93 billion under management. The two new index offerings will bring to 70 the number of investment portfolios offered by Vanguard Group. *** Franklin Resources Inc. and Templeton, Galbraith & Hansberger Ltd. received shareholder approval to complete their merger. Shareholders of the mutual funds managed by Templeton and its af- filiates also approved new investment management agreements that will become effective with the merger between TGH and Franklin. Franklin Group manages 71 funds, primarily invested in U.S. fixed-income securities, and had $69.2 billion under management as of Sept. 30. Templeton, which is known for its global equity investing, manages 78 funds worldwide - 19 of which are distri- buted in the U.S. - and had $20.7 billion under management on Sept. 30. The merged entity's combined assets under management of $89.9 billion make it the largest publicly traded, independent mutual fund company in the U.S. Of all fund groups, it trails Fidelity Investments' $185 billion, Merrill Lynch Asset Management's $134.6 billion, and Vanguard Group's $93 billion. A spokeswoman said there will no changes in portfolio management. Franklin is making arrangements to allow Franklin and Templeton customers to exchange into and out of funds in both groups without having to pay a commission. A spokeswoman said Franklin hopes to offer the service within three months. *** Charles Bauer, chairman and chief executive of AIM Management Group, has announced new directors and officers at three subsidi- aries of AIM Management. Jonathan Schoolar, who is chief invest- ment officer and co- manager of AIM Weingarten, Constellation and Convertible- funds, was named to the directorate of AIM Management. James Salners and Gary Crum were elected directors of AIM Distributors Inc. AIM manages $20 billion in assets for more than 825,000 shareholders. This article is copyright 1992 Investors Business Daily. Redis- tribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM