Vanguard Turning Away High-Yield Hunters

Investors’ recent exodus to yield-bearing stocks and funds is nothing new, but apparently the crowds at Vanguard are getting so thick, it’s shutting the door.

On Thursday, Vanguard announced it’s closing the High-Yield Corporate Fund (MUTF:VWEHX) to “most new accounts” because — so sad — cash inflows have been just too heavy. VWEHX, the third-largest high-yield corporate bond fund, holds about $17 billion in assets and has seen about $2 billion pour in in the past six months.

That’s most new accounts, not all. A note at the bottom of Vanguard’s press release states: “New accounts may be established by clients of Vanguard Flagship Services and Vanguard Asset Management Services.” You must have $1 million or more in Vanguard assets to have Flagship status.

However, slightly lesser-heeled investors seeking corporate junk bonds needn’t worry; the sea is full of fish.

For instance, the Fidelity High Income Fund (MUTF:SPHIX) is a no-load corporate bond fund whose 0.75% expense ratio is low (though not nearly as cheap as VWEHX’s 0.23% fees) and a comparable 6.6% yield (VWEHX boasts 6.75%). SPHIX has manages about $5.7 billion in assets.

Or, if you’re willing to take a bit more of a hit, the Guggenheim High Yield A Shares (MUTF:SIHAX) charges 1.18% in expenses and a 4.75% load fee but boasts an 8.75% yield. It’s not nearly as popular as SPHIX, though, with just $92.2 million under management.

If you want to stray away from mutual funds and get hip to exchange-traded funds, two popular choices include the iShares iBoxx $ High Yield Corporate Bond (NYSE:HYG) ETF, which charges 0.5% in expenses and has about $14 billion in assets, and the appropriately tickered SPDR Barclays Capital High Yield Bond (NYSE:JNK) ETF, which charges 0.4% and has about $10.5 billion in assets. Both sport yields above 7%.

But if you had your heart set on VWEHX, history says you might be able to wait it out, as this is the second time Vanguard has closed the fund. Vanguard High-Yield Corporate also shut its doors in June 2003 after seeing $1.4 billion in net cash flows in the first five months of the year, but it reopened in December 2003.

Kyle Woodley is the assistant editor of As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley.

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