On May 24, Vanguard made the following announcement on its web site:
Due to a sharp increase in cash flow into Vanguard High-Yield Corporate Fund—more than $2 billion in the last six months alone—we've closed the fund to most new investors.
While issuance of high-yield securities remains strong (the first quarter of 2012 saw the highest amount on record), we remain sensitive to the potential liquidity challenges that can arise in the market. Because of this potential, we've determined that limiting cash flow into the fund is in the best interest of its existing investors. This move will help the fund's advisor, Wellington Management Company, continue to execute its high-quality approach to high-yield investing.Bob Brinker has this fund in his "Marketimer Income Portfolio" with a 25% weighting. Usually when a fund he recommends closes to new investors he sells the fund and makes a new recommendation. Of course, this is not one of his "official model portfolios" that he advertises performance for so he could keep it.
Wellington Management is among the nation's oldest and most respected institutional investment managers. The firm has advised Vanguard High-Yield Corporate Fund since its inception in 1978.
Vanguard Chairman and CEO Bill McNabb attributed demand for the fund to today's low-yield investing environment.
"We continue to see investors turn to high-yielding alternatives," Mr. McNabb said. "The flows into the High-Yield Corporate Fund have been particularly acute, so we're taking this proactive step."
This isn't the first time Vanguard High-Yield Corporate Fund has closed because of high demand. In June 2003, the fund closed after it had a cash inflow of $1.4 billion during the first five months of the year. The fund reopened about six months later after cash flow slowed to a more manageable level.
If you're a current investor in the fund, you can continue to invest in it without limit. You may also become a new investor in the fund, without limit, if you're a client of Vanguard Asset Management Services™ or Vanguard Flagship Services™. Access to select Vanguard mutual funds closed to other investors is just one of the benefits offered by both services.
Vanguard High-Yield Corporate Fund's board of trustees will continue to monitor cash flows and take steps, as appropriate, to limit the fund's size or reopen it to new investors.