Vanguard International Explorer Fund
From Bogleheads
| This article or section contains information that needs to be updated. Please update the article to reflect recent events or newly available information/data. Please see this article's discussion page for details. |
| Company: | Vanguard |
|---|---|
| Fund category: | International Stock |
| Benchmark: | S&P/Citigroup EMI EPAC Index |
| Start date: | 11/04/1996 |
| Expense ratio: | 0.36% |
The Vanguard International Explorer Fund is an actively managed international small cap fund, presently benchmarked to the S&P/Citigroup EMI EPAC Index. The fund has been managed from its 1996 inception by Schroder Investment Management North America, Inc. The portfolio manager since 2000 has been Matthew Dobbs. From its prospectus:
The Fund invests primarily in the equity securities of small-capitalization companies located outside the United States that the advisor believes offer the potential for capital appreciation. In doing so, the advisor considers, among other things, whether a company is likely to have above-average earnings growth, whether the company's securities are attractively valued, and whether the company has any proprietary advantages.
The Fund Holdings page on the Vanguard website reports that as of 11/30/2008, the fund invests in 202 stocks, while the benchmark index includes 3,652. The fund was allocated across the following regions:
| Region | Allocation |
| Emerging Markets | 7.4% |
| Europe | 62.5% |
| Pacific | 28.3% |
| North America | 1.8% |
Contents |
Share Classes
The Vanguard International Explorer Fund (VINEX) presently offers only investor shares at a current expense ratio of 0.36%. The minimum investment in the fund is $25,000; additional investments have a $100 minimum.
Advantages
Expenses
The Vanguard International Explorer Fund is among the lowest cost international small cap funds available with a low 0.36% expense ratio. The fund has consistently passed along economy of scale cost efficiencies to shareholders as fund asset levels have grown.
The fund paid $4,861,000 in brokerage commissions during fiscal year 2007 for a Commission Ratio (CR) of 0.159%. The fund's CR has moderated as assets have grown, although brokerage costs are partially related to the level of fund turnover in a given year.[1] The fund had turnover of 45% in fiscal year 2007; the average small cap international fund turnover for the year was 72% [source: Morningstar].
| Year | ER | Turnover | CR |
| 2008 | 0.36 | 29% | x.xxx |
| 2007 | 0.35 | 45% | 0.159 |
| 2006 | 0.44 | 32% | 0.107 |
| 2005 | 0.50 | 38% | 0.140 |
| 2004 | 0.57 | 21% | 0.240 |
| 2003 | 0.73 | 60% | 0.297 |
| 2002 | 1.04 | 40% | 0.309 |
Criticisms
Active Management
This fund uses active management. Several ETFs invest passively in this asset class. See International Small-Cap for details.
Asset Levels and Style Drift
The asset growth of the Vanguard International Explorer Fund to $1.1 billion (as of 10/31/08) has resulted in the fund's small cap mandate drifting into mid cap stocks. Morningstar reports the fund to consist of 8.3% large cap stocks; 60.0% mid cap stocks; and 31.7% small cap stocks (as of 09/30/08).
Tax Efficiency
The fund has been quite tax inefficient as detailed below.
| Year | Dividend | Capital Gain | Foreign tax credit |
| 2008 | 2.59% | 11.82% | 0.19% |
| 2007 | 1.99% | 6.68% | 0.13% |
| 2006 | 2.56% | 6.28% | 0.13% |
| 2005 | 2.17% | 1.61% | 0.10% |
| 2004 | 1.96% | - | 0.13% |
| 2003 | 1.52% | - | 0.22% |
| 2002 | 1.13% | - | 0.24% |
| 2001 | 0.15% | 2.88% | - |
| 2000 | -0.20% | 12.65% | - |
| 1999 | 0.53% | 4.90% | - |
Performance
This historical returns webpage provides VINEX performance for each of the 11 full calendar years the fund has been in existence. During this 1997-2007 period, the fund had an average annualized return of 14.83%. Its best calendar year result was +90.29% (1999), and its worst was -22.52% (2001).
VINEX is benchmarked to the S&P/Citigroup EMI EPAC Index. According to Vanguard, this bogey:
Measures the performance of the smallest companies from the European and Pacific countries represented in the S&P/Citigroup Broad Market Index. The EMI EPAC Index represents the bottom 20% of the total market capital of each country. Index returns are adjusted for withholding taxes applicable to Luxembourg holding companies.
Over the 1997-2007 epoch, the benchmark achieved an average annualized return of 10.05%. Its best calendar year result was +52.93% (2003), and its worst was -16.39% (2001).
Vanguard Institutional reports updated three year standard deviations of monthly returns. This measure of return volatility shows the fund had a 21.90% standard deviation compared to the 22.20% standard deviation of the benchmark as of 11/31/08.
History
- Fund reopened 10/31/2008
- Fund closed 08/19/2004
- Fund adoption 06/2002
The fund's fiscal year ends on 10/31 of each year
Notes
[1] Comparative benchmarks for brokerage commission expense are not readily available. In a 2004 ZAG commissioned study, "Portfolio Transactions Costs at U.S. Equity Mutual Funds" authors Jason Karceski, Miles Livingston, and Edward S. O'Neal, found that in 2002, international funds paid an average commission of 0.456%; emerging market funds paid 0.609%. The weighted dollar commissions (what investors actually held) produced a weighted commission of 0.259% for international funds, and 0.399% for emerging market funds.
Lipper, in a 2004 study, Mutual Fund Trading and Portfolio Transaction Costs, found that the average weighted commission paid by international small cap funds was 0.41% in 2003, with a range of expense between 0.129% and 3.542%.
See also
