Upcoming fund changes
What’s changing
The Vanguard SustainableLife Equity Funds are changing their name to:
Vanguard ActiveLife Climate Aware 40-50% Equity Fund
Vanguard ActiveLife Climate Aware 60-70% Equity Fund
Vanguard ActiveLife Climate Aware 80-90% Equity Fund
How the investment policies are described will also change to make it clearer to investors what the funds are invested in.
There are small changes to prevent investments in bonds (1) issued by governments known as ‘sovereign bonds’, where those governments have fuel exports above a defined threshold.
There is no change to the fund charges.
Why we made this change
The Financial Conduct Authority (FCA) has introduced new rules, known as the Sustainability Disclosure Requirements, which apply to the funds because they have environmental and/or social characteristics.
The new rules allow a fund to use a sustainable investment label if it meets certain conditions. These labels help investors find products that have a specific sustainability goal.
The new rules also set new requirements around the names that can be used for funds with sustainability characteristics. In particular, funds cannot use the term ‘sustainable’ in their name unless they are using a sustainable investment label. The use of other ESG-related terms also needs to be clear to investors.
Funds that meet the FCA’s new rules can use 1 of 4 new labels:
Sustainability Focus
Sustainability Improvers
Sustainability Impact
Sustainability Mixed Goals
To use the labels, funds must meet the following criteria:
a sustainability objective with environmental or social outcomes
70% of assets invested with reference to a robust, evidence-based standard
the remaining 30% of assets cannot conflict with the sustainability objective of the fund
KPIs to measure how the fund is meeting or making progress to its sustainability objective
a strategy for stewardship (2)
appropriate resources and governance (3)
Vanguard is not applying one of these labels as the funds do not meet the criteria outlined above and we would have to change how we manage these funds.
The funds are still ESG funds even though they do not have a label. They do still have sustainable characteristics, and they do still consider ESG factors in the investment process.
The change to the investment policy will make it clearer how the fund invests.
What do I need to do?
You do not need to do anything if you are an investor in one of these funds.
When are the changes happening?
The changes will happen on 26 November 2024. An updated fund prospectus and Key Investor Information Documents will be published on or around that date to reflect the changes. Vanguard will cover the costs relating to this change.
We will also be adding a new consumer-facing disclosure. This provides further information about the fund and how it manages ESG-related issues.
(1) Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.
(2) The responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries, leading to sustainable benefits for the economy, the environment and society.
(3) Sufficient resources, governance and organisational arrangements to achieve the sustainability objectives.
What’s changing
The Vanguard Global Sustainable Equity Fund is changing its name to:
The Vanguard Global Capital Stewards Equity Fund.
There are no changes to the way this fund is managed. However, we are making changes to the way the investment policy is described within the Prospectus.
There is no change to the fund charges.
Why we made this change
The Financial Conduct Authority (FCA) has introduced new rules, known as the Sustainability Disclosure Requirements, which apply to the funds because they have environmental and/or social characteristics.
The new rules allow a fund to use a sustainable investment label if it meets certain conditions. These labels help investors find products that have a specific sustainability goal.
The new rules also set new requirements around the names that can be used for funds with sustainability characteristics. In particular, funds cannot use the term ‘sustainable’ in their name unless they are using a sustainable investment label. The use of other ESG-related terms also needs to be clear to investors.
Funds that meet the FCA’s new rules can use 1 of 4 new labels:
Sustainability Focus
Sustainability Improvers
Sustainability Impact
Sustainability Mixed Goals
To use the labels, funds must meet the following criteria:
a sustainability objective with environmental or social outcomes
70% of assets invested with reference to a robust, evidence-based standard
the remaining 30% of assets cannot conflict with the sustainability objective of the fund
KPIs to measure how the fund is meeting or making progress to its sustainability objective
a strategy for stewardship (1)
appropriate resources and governance (2)
Vanguard is not applying one of these labels as the fund does not meet the criteria outlined above and we would have to change how we manage the fund.
The fund is still an ESG fund even though it does not have a label. It still has sustainable characteristics and it still considers ESG factors in the investment process.
The change to the investment policy will make it clearer how the fund invests.
What do I need to do?
You do not need to do anything if you are an investor in one of these funds.
When are the changes happening?
The changes will happen on 26 November 2024. An updated fund prospectus and Key Investor Information Documents will be published on or around that date to reflect the changes. Vanguard will cover the costs relating to this change.
We will also be adding a new consumer-facing disclosure. This provides further information about the fund and how it manages ESG-related issues.
(1) The responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries, leading to sustainable benefits for the economy, the environment and society.
(2) Sufficient resources, governance and organisational arrangements to achieve the sustainability objectives.
What’s changing
The Vanguard ESG Developed World All Cap Equity Index Fund (UK) is changing its name to:
The Vanguard ESG Screened Developed World All Cap Equity Index Fund (UK)
There are no changes to the way this fund is managed. However, we are making changes to the way the investment policy is described within the Prospectus.
There is no change to the fund charges.
Why we made this change
The Financial Conduct Authority (FCA) has introduced new rules, known as the Sustainability Disclosure Requirements, which apply to the funds because they have environmental and/or social characteristics.
The new rules allow a fund to use a sustainable investment label if it meets certain conditions. These labels help investors find products that have a specific sustainability goal.
Funds that meet the FCA’s new rules can use 1 of 4 new labels:
Sustainability Focus
Sustainability Improvers
Sustainability Impact
Sustainability Mixed Goals
To use the labels, funds must meet the following criteria:
a sustainability objective with environmental or social outcomes
70% of assets invested with reference to a robust, evidence-based standard
the remaining 30% of assets cannot conflict with the sustainability objective of the fund
KPIs to measure how the fund is meeting or making progress to its sustainability objective
a strategy for stewardship (1)
appropriate resources and governance (2)
Vanguard is not applying one of these labels, as the fund uses an exclusions investment strategy, which does not meet the criteria outlined above.
Vanguard is adding the word ‘screened’ to the fund name to make it clear the fund tracks the FTSE Developed All Cap Choice Index, which has excluded, or screened out companies based on ESG criteria, rather than choosing investments based on ESG criteria.
What do I need to do?
You do not need to do anything if you are an investor in one of these funds.
When are the changes happening?
The changes will happen on 26 November 2024. An updated fund prospectus and Key Investor Information Documents will be published on or around that date to reflect the changes. Vanguard will cover the costs relating to this change.
We will also be adding a new consumer-facing disclosure. This provides further information about the fund and how it manages ESG-related issues.
(1) The responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries, leading to sustainable benefits for the economy, the environment and society.
(2) Sufficient resources, governance and organisational arrangements to achieve the sustainability objectives.
Previous fund changes
What does the fund do currently?
The fund seeks to increase the value of your investments over the long term. The fund tries to do this in two ways. Firstly, the fund buys shares of companies which may increase in value over time. These shares form the ‘capital’ of the fund. Secondly, the fund receives cash payments (referred to as ‘income’) when the companies it invests in pay dividends to shareholders out of their profits.
The fund keeps a record of the shares it owns in the ‘capital account’ and the income it has received in the ‘income account’.
The main fee payable by the fund is the annual management charge, which covers the costs of running the fund. Currently, this charge is paid from the fund’s capital account. This means the fund may have to sell the shares it owns to pay the charge rather than using cash from the income account.
What is changing?
We are making a change to allow fees to be paid from the income account. The fund will be able to use the cash it already has to pay the annual management charge, rather than having to sell the shares it owns. This change is permitted under UK rules.
What do the changes mean in practice?
The fees you pay for investing in the fund are not changing.
Currently, the capital of the fund is reduced when fees and payments are taken. This could mean we have to sell investments to cover the annual management charge.
In future, these fees will be taken from income, so the capital of the fund will not be impacted.
Since growing capital is a key objective of the fund, we believe this change is in the best interests of investors.
When will the changes take place?
The changes will take effect from 1 November 2024. An updated fund prospectus will be published on or around that date to reflect the changes. Vanguard will cover the costs relating to this change.
Date of this notice: 12 August 2024
Exposure to the Index
As outlined in the Prospectus, the investment objective of the Sub-Fund is to seek to track the performance of the MSCI Emerging Markets Index (the “Index”).
The UCITS Regulations, which transposed Directive 2009/65/EC (the “UCITS Directive”) into Irish law, provide that no more than 10% of a UCITS’ net asset value may be invested in transferable securities or money market instruments issued by the same body (the “10% Limit”).
However, the UCITS Regulations also provide that for a UCITS that has an investment policy to replicate the composition of an index (i.e. an index tracking fund), such as the Sub-Fund, the 10% Limit may be increased to 20%. Accordingly, where permitted by the Central Bank, such UCITS may continue to have exposure to an index which has constituents issued by the same body which account for up to 20% of the relevant index being tracked (the “Increased Diversification Limit”).
As at the date of this Notice, no single constituent of the Index amounts to more than 10% of the Index. However, in light of recent market movements, there is a possibility that one of the Index constituents may exceed 10% of the Index in the future. In order to allow the Sub-Fund to continue to track the Index in the event that any of the index constituents exceed the 10% Limit, it is necessary to update the Prospectus to reflect the Increased Diversification Limit.
Revised Prospectus
A revised Prospectus reflecting that the Sub-Fund seeks to fully replicate the Index and, where necessary in doing so, avail of the Increased Diversification Limit has been submitted to the Central Bank. Once noted by the Central Bank, the revised Prospectus will be made available on https://www.ie.vanguard/products.
Is any action required?
No action is required from Shareholders in respect of the change outlined in this Notice.
Date of this notice: 12 August 2024
Exposure to the Index
As outlined in the Prospectus, the investment objective of the Sub-Fund is to seek to track the performance of the FTSE Emerging Index (the “Index”).
The UCITS Regulations, which transposed Directive 2009/65/EC (the “UCITS Directive”) into Irish law, provide that no more than 10% of a UCITS’ net asset value may be invested in transferable securities or money market instruments issued by the same body (the “10% Limit”).
However, the UCITS Regulations also provide that for a UCITS that has an investment policy to replicate the composition of an index (i.e. an index tracking fund), such as the Sub-Fund, the 10% Limit may be increased to 20%. Accordingly, where permitted by the Central Bank, such UCITS may continue to have exposure to an index which has constituents issued by the same body which account for up to 20% of the relevant index being tracked (the “Increased Diversification Limit”).
As at the date of this Notice, no single constituent of the Index amounts to more than 10% of the Index. However, in light of recent market movements, there is a possibility that one of the Index constituents may exceed 10% of the Index in the future. In order to allow the Sub-Fund to continue to track the Index in the event that any of the index constituents exceed the 10% Limit, it is necessary to update the Prospectus to reflect the Increased Diversification Limit.
Revised Prospectus
A revised Prospectus reflecting that the Sub-Fund seeks to fully replicate the Index and, where necessary in doing so, avail of the Increased Diversification Limit has been submitted to the Central Bank. Once noted by the Central Bank, the revised Prospectus will be made available on https://www.ie.vanguard/products.
Is any action required?
No action is required from Shareholders in respect of the change outlined in this Notice.
On 12 August 2024, changes were made to the sub-investment advisers appointed for this fund.
What the fund used to do
- The fund’s investment adviser (Vanguard Global Advisers, LLC) appointed 3 sub-investment advisers to manage approximately equal portions of the fund.
- The sub-investment advisers use their expertise to pick investments for their portions of the fund.
- The sub-investment advisers were Oaktree, Pzena and Baillie Gifford.
What’s changed
- Oaktree has been removed as a sub-investment adviser.
- Pzena and Baillie Gifford will manage the portion of the fund previously managed by Oaktree.
Why we made this change
Our ongoing monitoring of the fund’s sub-investment advisers looks beyond short-term performance to focus on the drivers of long-term success.
As part of this review process, we’ve determined that changes to the investment advisory structure would best serve current and future shareholders of the fund.
What does the change mean in practice?
You do not need to take any action.
There will be some adjustments to the fund’s underlying investments. The costs of making these adjustments will be borne by the fund.
There will be no change to the fund’s investment objective, investment policy, risk profile or ongoing costs as a result of the change.
The Vanguard SRI European Stock Fund is changing the index it tracks from on or around 24 June 2024. This change means the fund will also change its name, objective and investment policy.
What the fund does now
The fund promotes environmental and social characteristics by not investing in companies that:
- are involved in activities that result in serious violations of the United Nations Global Compact Principles
It may also avoid investing in companies involved in the production of:
- controversial weapons (for example, cluster munitions, land mines, biochemical and nuclear weapons)
- tobacco
To do this, the fund tracks the FTSE Developed Europe Index. This is a non-ESG index. The fund then manually excludes companies that do not meet its environmental and social characteristics.
What’s changing
The fund will track a new index that excludes a wider range of companies, including those involved in:
- non-renewable energy (nuclear power and fossil fuels – including power generation from oil, gas, and thermal coal)
- vice products (tobacco, gambling, alcohol, cannabis and adult entertainment)
- weapons (chemical and biological weapons, cluster munitions, anti-personnel landmines, nuclear weapons, civilian firearms and conventional military weapons)
It will also exclude companies that do not meet the labour, human rights, environmental, and anti-corruption standards as defined by the United Nations Global Compact Principles.
To make this change the fund will start tracking the FTSE Developed Europe Choice Index. This is a dedicated ESG index. The fund’s new name will be the Vanguard ESG Developed Europe Index Fund.
Why we’re making this change
We have reviewed our fund range and the wider market and found that investors are increasingly focused on the environment and climate change. We believe the change we’re making will better meet the preferences of those investors.
From the week of 6 December 2021, the Vanguard Global Balanced Fund will:
- be called the Vanguard SustainableLife 60-70% Equity Fund
- invest in a sustainable way based on certain sustainability criteria
If you’re already invested in the Vanguard Global Balanced Fund, you do not need to do anything. Your money will remain invested, the fund manager will not change and the overall objective of the fund will stay the same.
If you do not want to stay invested in the Vanguard Global Balanced Fund when it changes, you can sell your units at any time.