Changes to our taxable money market fund lineup

Editor’s note: The original announcement introducing these changes previously ran in August 2020 and was revised on September 29, 2020.

To help give investors the best chance for investment success, we continuously assess our fund lineup. In certain instances and after careful deliberation, we find even our most well-known funds must evolve to better serve our clients.

We recently announced changes to our Prime Money Market Fund that aim to better support your needs for principal preservation and liquidity, while still seeking to provide a competitive yield over the long term.

Key changes

Effective September 29, Vanguard Prime Money Market Fund has a new name and investment strategy, and a change to its Investor share class. Here are the details of the changes:   

• We’ve changed the fund’s name to Vanguard Cash Reserves Federal Money Market Fund.
• We’ve updated the fund’s prospectus to reflect its new investment strategy, which focuses almost exclusively on cash investments, U.S. government securities, and/or repurchase agreements collateralized solely by U.S. government securities or cash.
• We’ve closed the fund’s Investor share class to new investors. Investor Shares remain available for additional purchases by current shareholders, but we’ll be phasing the Investor share class out in the months ahead. Clients can invest in the fund’s Admiral™ Shares, whose investment minimum was lowered to $3,000 in late August, making more than 1 million shareholders eligible for the lower-cost share class (0.10% for Admiral Shares compared with 0.16% for Investor Shares).

What you need to do

Current Investor Shares (VMMXX) owners: You have the option to convert Investor Shares immediately to Admiral Shares to begin taking advantage of the lower expense ratio. Here are simple step-by-step instructions. If you don’t initiate a conversion, we expect to convert your shares automatically around late April through August 2021. Note: Our checkwriting service isn’t available for the fund’s Admiral share class and won’t carry over on conversion to the Admiral share class. Checkwriting is available for Vanguard Federal Money Market Fund and other Vanguard money market funds.

Current Admiral Shares (VMRXX) owners: You don’t need to take any action.

Vanguard Personal Advisor clients who own Investor Shares (VMMXX): We’ll convert your Investor Shares automatically to Admiral Shares during the next quarterly rebalance. Contact an advisor if you have questions about this transition. Note: Our checkwriting service isn’t available for the fund’s Admiral share class. Checkwriting is available for Vanguard Federal Money Market Fund and other Vanguard money market funds.

Background

Vanguard Cash Reserves Federal Money Market Fund is designated as a government money market fund, which is expected to reduce the fund’s credit risk and strengthen its liquidity.

A government money market fund must hold at least 99.5% of its assets in cash, U.S. government securities, and/or repurchase agreements collateralized solely by U.S. government securities or cash. By contrast, a retail prime money market fund may invest heavily in certain securities issued by companies—most commonly, commercial paper—as well as securities issued by the U.S. government and other money market securities.

With these changes, Vanguard seeks to continue to deliver a money market fund with yields highly competitive to prime money market fund yields, while providing the safety and security of a portfolio of government securities. Our formula is as simple as it has been successful: prudent management and low costs.