This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Vanguard Fires MSCI; Should You Fire Vanguard?

NEW YORK ( TheStreet) -- Vanguard has fired MSCI. Twenty-two Vanguard index funds that were tracking stock indexes from MSCI will soon be following FTSE and CRSP indexes.

What does this mean to you? Should you be concerned? Should you fire Vanguard as your ETF vendor? Read on for answers.

Background: On Oct. 2 , Vanguard announced a huge change. Over a period of six months, 22 Vanguard index funds will change the benchmarks used to measure their performance. Six international stock funds will transition from familiar MSCI indexes to established, yet less popular FTSE benchmarks.

Additionally, 16 U.S. stock funds will move to newly developed benchmarks from the University of Chicago's Center for Research in Security Prices, or CRSP. These changes will apply to all the funds' share classes, including exchange-traded funds (ETFs). The Vanguard announcement linked above has a list of affected funds.

The changes will take place gradually during the first six months of 2013, although Vanguard does not intend to reveal the schedules for individual funds. An added twist for the Vanguard Emerging Markets ETF (VWO) is it will be tracking a specially developed transition index during that time. Additional information on this process is available in the FTSE Transition overview (pdf).

Vanguard's ETFs are structured as an additional share class to their mutual funds. The affected funds are typically available in three share classes: Investor, Admiral and ETF. Therefore, up to 66 fund tickers may be affected by these changes.

According to Vanguard, assets in these funds total about $537 billion. This is not a trivial change.

What does this mean to you?

The primary implication for investors is to understand that when you choose an ETF, you are also choosing an ETF sponsor/manager and choosing an index. This has always been true to some extent. However, with multiple ETF providers basing their offerings on the same indexes, the choice was previously just a matter of choosing the ETF provider.
>>> On Tuesday, November 20 at 6pm ET, TheStreet will host a Trade Credit Insurance webinar with Todd Lynady, Senior Underwriter for Zurich in North America and Mike DeLuca, Senior Partner of One Source. Register now.

When building portfolios based on multiple index providers, investors need to be cognizant of overlap and underlap. The most talked about example of this appears in the international indexes and the classification of South Korea. In the MSCI methodology, South Korea is an "emerging market" while in the FTSE methodology it has "developed market" status.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
VWO $33.86 -2.80%
BLK $355.69 -1.60%
AAPL $95.18 1.60%
FB $117.44 -0.95%
GOOG $692.33 -0.84%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs