Vanguard temporarily closes fund to new investors

VALLEY FORGE, Pa. — Investment manager and mutual fund company Vanguard on Friday said it is temporarily closing its top-performing fund for 2009 to new investors.

The company called it a “cooling off” period for the $742 million Vanguard Capital Value Fund, which posted a total return of 68.5 percent through the first nine months of the year.

Vanguard said assets in the fund have more than tripled since the start of the year because of market appreciation and new investments.

Vanguard CEO Bill McNabb said closing the fund will protect existing shareholders from investors who are chasing the high returns, especially short-term investors who could drive up transaction costs by moving in and out of the fund.

And, he added, “it protects prospective investors from themselves, as high-performing funds will almost certainly drop off at some point.”

Existing shareholders, including participants in 401(k) plans and other defined contribution plans that include the fund as an option, will be able to continue investing in it.

Vanguard used similar cooling-off periods for its High-Yield Corporate Fund in 2003 and its Health Care Fund in 1999. Those funds reopened after six months and 10 months, respectively.

The company currently has seven funds that are closed to most new accounts.