He pointed to the Vanguard Emerging Markets Stock Index Fund and the accompanying VWO ETF share class, both of which will move from the MSCI Emerging Markets Index to the FTSE Emerging Index. A big difference between the two indexes is that the latter classifies South Korea as a developed market, which would exclude a number of top-notch Korean companies from those two funds.
Vanguard said it doesn't plan any changes for its U.S. stock index funds that track the Russell and Standard and Poor's benchmarks, or for the 11 Vanguard sector equity funds that track MSCI benchmarks.
Vanguard noted that based on its analysis of current market conditions, it doesn't expect the benchmark transition will produce capital gains distributions to shareholders because each of the index funds have realized capital losses that can offset any realized gains.
And while it does expect some transaction costs resulting from portfolio turnover, Vanguard said it will seek to minimize the impact through efficient portfolio trading and other strategies.
--Jeff Schlegel