Author Topic: 401k Fund Q - Vanguard Employee Benefit Index  (Read 2733 times)

Mustache_In_Training

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401k Fund Q - Vanguard Employee Benefit Index
« on: October 18, 2016, 12:16:05 PM »
Hi all,

I have a question about a particular fund my workplace 401k offers. It's called the Vanguard Employee Benefit Index. It appears to be an S&P index. I cannot find any expense ratio for this particular fund. I asked my HR department about the fund and they replied with this "Vanguard Employee Benefit Index is a CIT (Collective Investment Trust) fund and does not show performance/rate of return directly on our website or participant statements. We get the information from the fund companies."

Visiting the Vanguard website they have the fund performance, but under expense ratio they simply say "Pricing flexibility is available. For information about fees, contact your Vanguard representative, or call 800-523-1036."  I called the phone number listed and got stuck in robo-call land.

Why is it so difficult to find this information? It seems like an important metric to hide from participants.  At the end of the day, I just want to know whether I should invest in this fund. Any help would be appreciated.

Mustache_In_Training

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Re: 401k Fund Q - Vanguard Employee Benefit Index
« Reply #1 on: October 18, 2016, 12:51:31 PM »
As an update: I got ahold of a Vanguard representative. After going back and forth with him for 20 minutes, he was as confused as I was. He can't find an expense ratio for this fund either. *Shrugs

Proud Foot

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Re: 401k Fund Q - Vanguard Employee Benefit Index
« Reply #2 on: October 18, 2016, 02:00:08 PM »
Given that this fund has a $400M minimum investment my guess is that the fees are negotiated during the set up of the 401k plan.  Since it is a trust rather than a mutual fund I am sure they have some sort of a structured pricing model for the plans and people who invest in it. FWIW, it has marginally outperformed the S&P500 index since 2006.

https://institutional.vanguard.com/iippdf/pdfs/FS528R.pdf

Mustache_In_Training

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Re: 401k Fund Q - Vanguard Employee Benefit Index
« Reply #3 on: October 18, 2016, 03:31:01 PM »
I suspect the same thing, that fees are negotiated on a case by case basis. I find it very odd that no one in my organization nor the 401k provider can tell me what the actual expense ratio is.

I guess I can assume the expense ratio is low and go for it. I'd rather just know for certain though.

Vilgan

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Re: 401k Fund Q - Vanguard Employee Benefit Index
« Reply #4 on: October 18, 2016, 04:59:33 PM »
Someone in your organization will know, just have to find the right people. Try to identify who is on your 401k committee and reach out to one of them.

Odds are very good that the rate is extremely low and not worth worrying about though. Trusts like this are for large corps that can negotiate better rates than Admiral funds and the like. For example, Exxon has something similar (not with Vanguard) and expense ratios are well below anything normally available. IIRC it was something like 1.8 basis points for domestic instead of the 5 basis points normally available at Vanguard (VTI and equivalent admiral funds).

Your HR Benefits specialist(s) should be able to point you in the right direction.

Mustache_In_Training

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Re: 401k Fund Q - Vanguard Employee Benefit Index
« Reply #5 on: October 19, 2016, 07:04:21 AM »
After further digging I found the expense ratio in a fee's document.

0.00% For real?
« Last Edit: October 19, 2016, 07:05:54 AM by Mustache_In_Training »

Vilgan

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Re: 401k Fund Q - Vanguard Employee Benefit Index
« Reply #6 on: October 20, 2016, 10:55:03 AM »
After further digging I found the expense ratio in a fee's document.

0.00% For real?

Very possible.

They get to avoid a bunch of extra compliance nonsense by taking the trust fund approach that reduces Vanguards fees.

Then they can also fund the expense by loaning stocks out. Essentially letting others "short" stocks at little to no risk and paying for expenses from the fees people pay to borrow the stocks to short them.

TexasRunner

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Re: 401k Fund Q - Vanguard Employee Benefit Index
« Reply #7 on: October 20, 2016, 11:17:45 AM »
Holy crap!  Nice!!!!!!!!!!!

Wish I had that!

Apparently it is .0049% or less, plus the employer probably pays (similar to subsidizing) a fee annually to fund the management.  Thats really awesome.  congrats!