Vanguard funds and payables to Vanguard Group Inc.


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At year-end 2017 The Vanguard Group Inc. managed over five trillion dollars of investor assets. This accumulation of assets is a continuation of a trend of massive inflows of investor funds. The company surpassed two trillion dollars in assets under management in 2013; surpassed three trillion dollars in 2014; and surpassed four trillion dollars in 2014.

Low costs are a key reason for attracting investor dollars. Vanguard currently manages funds for an average expense ratio of 0.12%. While this is low in percentage terms, Vanguard’s huge size means that the dollar expense is large: expenses tally six billion dollars annually.

In addition to this annual expense, Vanguard funds also have deferred costs which are not currently due, but are included as a liability in a fund’s annual report in the Statement of Assets. These deferred costs include deferred compensation/benefits and risk/insurance costs. As the explanatory footnote explains:

Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Assets and Liabilities.

While Vanguard does not provide detailed explanations, the deferred compensation program is likely to be a nonqualified deferred compensation plan offered to company executives.

On a collective basis, these deferred costs have accrued to two billion dollars. The table below, covering 157 Vanguard fund portfolios,  provides the breakdown of these costs per fund, as of the most recent 2017 fiscal year annual or semi-annual report.

Spreadsheet source: Payables to Vanguard.

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