The international equity allocation for both types of funds will increase from 30% to 40% of equity exposure. This brings the funds closer to the world cap-weight of 48% US / 52% International. As justification for the change, Vanguard says:
"International exposure provides valuable diversification benefits. Vanguard evaluated a number of factors, including worldwide market cap, home bias, costs and others, in determining the right mix of U.S. and international stocks and bonds." and "It has become easier to capture these diversification benefits as the costs of international investing have decreased"
This is in-line with their
Considerations for investing in non-U.S. equities study, where they concluded:
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Although finance theory dictates that an upper asset allocation limit should be based on the global market capitalization for international equities (currently approximately 58%), we have demonstrated that international allocations exceeding 40% have not historically added significant additional diversification benefits,
particularly accounting for costs. For many investors, an allocation between 20% and 40% should be considered reasonable, given the historical benefits of diversification.
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I wouldn't be surprised if they moved to a fully-cap weighted portfolio in a few years when costs come down.
Source:
https://personal.vanguard.com/us/insights/article/fund-announcement-02262015?SYND=RSS&Channel=MFN
