The long-time pillar of index investing, Vanguard, has decided to embrace alternative strategies with a new Vanguard Alternative Strategies Fund. In this departure from the mission of founder and retired CEO, John C. Bogle, Vanguard plans to short equities, trade currencies, and trade in commodity-linked investments.
While Vanguard is known for rock-bottom fees like 0.05% per year, the new fund is expected to cost a whopping 1.10% every year. This is cheaper than some competing alternative strategies funds, but is very pricey for Vanguard. Over 25 years, this amounts to a total cost of 24%.
Some of the other strategies Vanguard intends to use include trading in options, foreign currency exchange forward contracts, commodity futures, Treasury futures, and swaps. This new direction will no doubt come as a shock to some long-term Vanguard investors.