Correspondence 0001683863-23-001664 from VANGUARD WELLINGTON FUND (CIK 0000105563)
VANGUARD WELLINGTON FUND (CIK 0000105563)
Date: Feb. 28, 2023 · CIK: 0000105563 · Accession: 0001683863-23-001664
AI Filing Summary & Sentiment
Letter
Washington, DC 20549 File No. 2-11444 Post-Effective Amendment No. 120
RE: Vanguard Wellington Fund (the "Trust")
Dear Ms. Larkin,
This letter responds to your comments provided on February 7, 2023, to the above-referenced post-effective amendment. The comments apply to Vanguard Short-Term Tax-Exempt Bond ETF (the "Fund"), a new series of the Trust.
Comment 1:
Prospectus
Comment:
As the Fund uses the term "short-term" in its name, the Staff generally takes the position
that it should have a dollar weighted average maturity of less than three years. Please add
disclosure clarifying that the Fund will have a dollar-weighted average maturity of less
than three years.
Response:
The adopting release for Rule 35d-1 states that the purpose of the rule is to prevent
investment companies from adopting names that could mislead investors about a fund's
investments and risks. In the adopting release and subsequent FAQ, the SEC provided
guidance that the dollar-weighted average maturity for a short-term bond fund should not
exceed 3 years. The text of the rule, however, does not require a 3-year average maturity
for short-term funds. We believe that under any reasonable interpretation of the adopting
release and Rule 35d-1, a dollar-weighted average maturity range up to 4 years qualifies as
short-term.
The Fund will seek to maintain a dollar-weighted average maturity consistent with that of
its target index. As of November 30, 2022, the target index had a dollar-weighted average
maturity of 3.06 years and, over the past ten years, the dollar-weighted average maturity of
the target index has not exceeded 3.5 years.
For these reasons, we believe the expected dollar-weighted average maturity of the index
and, therefore the expected dollar-weighted average maturity of the Fund, qualifies as
"short-term." And we believe that the name of the Fund is not misleading.
The disclosure has been revised accordingly.
Comment 2:
Prospectus
Comment:
The Principal Investment Strategy section includes disclosure that states "Each bond...
generally must be a constituent of a deal where the original offering amount was at least
$100 million; and generally have a minimum par amount of $25 million. In addition, to be
included in the Index, each bond must have a minimum term to maturity or call date greater
than one calendar month." For purposes of plain English disclosure, please revise this
language.
Response:
The disclosure has been revised accordingly.
Comment 3:
Prospectus
Comment:
The Fund's Principal Investment Strategy states that "Under normal circumstances, at least
80% of the Fund's assets will be invested in securities whose income will be exempt from
federal income taxes and the federal AMT." Please confirm that, for the purposes of the
Fund's 80% policy, the term "securities" includes bonds.
Response:
We confirm that for purposes of the Fund's 80% policy, the term "securities" includes
bonds.
Comment 4:
Prospectus
Comment:
Please confirm that the Fund's stated 80% policy includes "net assets plus borrowing."
Response:
We confirm that the Fund's stated 80% policy includes "net assets plus borrowing."
Comment 5:
Prospectus
Comment:
The SEC generally takes the position that a short-term bond fund should have a dollar-
weighted average maturity of less than 3 years. Please add disclosure clarifying that the
Fund's target index will have a dollar-weighted average maturity of less than three years.
Response:
The adopting release for Rule 35d-1 states that the purpose of the rule is to prevent
investment companies from adopting names that could mislead investors about a fund's
investments and risks. In the adopting release and subsequent FAQ, the SEC provided
guidance that the dollar-weighted average maturity for a short-term bond fund should not
exceed 3 years. The text of the rule, however, does not require a 3-year average maturity
for short-term funds. We believe that under any reasonable interpretation of the adopting
release and Rule 35d-1, a dollar-weighted average maturity range up to 4 years qualifies as
short-term.
As of November 30, 2022, the target index had a dollar-weighted average maturity of 3.06
years and, over the past ten years, the dollar-weighted average maturity of the target index
has not exceeded 3.5 years.
For the reasons discussed here and in the response to Comment 1, we believe that the
expected dollar-weighted average maturity of the index qualifies as "short-term."
The disclosure has been revised accordingly.
Comment 6:
Prospectus
Comment:
To the extent not already disclosed, please add disclosure to the Fund's prospectus
regarding (a) the index component selection criteria, explaining how index components are
included or excluded, (b) the index rebalance and reconstitution process, including the
frequency thereof, (c) the index weighting methodology, and (d) the number of index
components.
Response:
The disclosure has been revised accordingly.
Comment 7:
Prospectus
Comment:
Please consider adding "concentration risk" and "passive investment risk" to the Fund's
prospectus or explain why they are not necessary.
Response:
While the Fund is permitted to concentrate to the extent necessary to approximate the
composition of its target index, this is not currently considered to be part of the Fund's
principal investment strategies or principal risks.
We believe that the explanation in the section called "Investing in Index Funds" about the
investment strategy of indexing provides investors with relevant information about index
investing and passive investment strategies generally. For example, this section clearly
states that an index fund generally does not perform exactly like its target index and that
since market indexes do not have operating expenses and transaction costs, they will
usually have a slight performance advantage over funds that track them. We also note that
the Glossary of Investment Terms contains definitions of "Indexing."
Comment 8:
Statement of Additional Information
Comment:
Please revise the Fund's fundamental policies to align with the Fund's stated strategy of
investing at least 80% of its assets in securities whose income will be exempt from federal
income taxes and the federal AMT.
Response:
The disclosure has been revised accordingly.
Comment 9:
Statement of Additional Information
Comment:
Please note that the Fund should look through a private activity municipal debt security
whose principal and interest payments are derived principally from the assets and revenues
of a non-governmental entity in order to determine the industry to which the investments
should be allocated when determining the Fund's compliance with its concentration
policies.
Response:
We confirm that the Fund will look through a private activity municipal debt security
whose principal and interest payments are derived principally from the assets and revenues
of a non-governmental entity in order to determine the industry to which the investments
should be allocated when determining the Fund's compliance with its concentration policies.
Please contact me at anthony_coletta@vanguard.com with any questions or comments regarding the above response.
Sincerely,
/s/ Anthony Coletta
Show Raw Text
CORRESP
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filename1.htm
SEC Response Letter-Launch of Vanguard Short-Term Tax-Exempt Bond ETF
P.O. Box 2600
Valley Forge, PA 19482
February 28, 2023
Lisa N. Larkin, Esq.
U.S. Securities and Exchange Commissionvia electronic filing 100 F Street, N.E.
Washington, DC 20549
RE: Vanguard Wellington Fund (the "Trust")
File No. 2-11444
Post-Effective Amendment No. 120
Dear Ms. Larkin,
This letter responds to your comments provided on February 7, 2023, to the above-referenced post-effective amendment. The comments apply to Vanguard Short-Term Tax-Exempt Bond ETF (the "Fund"), a new series of the Trust.
Comment 1:
Prospectus
Comment:
As the Fund uses the term "short-term" in its name, the Staff generally takes the position
that it should have a dollar weighted average maturity of less than three years. Please add
disclosure clarifying that the Fund will have a dollar-weighted average maturity of less
than three years.
Response:
The adopting release for Rule 35d-1 states that the purpose of the rule is to prevent
investment companies from adopting names that could mislead investors about a fund's
investments and risks. In the adopting release and subsequent FAQ, the SEC provided
guidance that the dollar-weighted average maturity for a short-term bond fund should not
exceed 3 years. The text of the rule, however, does not require a 3-year average maturity
for short-term funds. We believe that under any reasonable interpretation of the adopting
release and Rule 35d-1, a dollar-weighted average maturity range up to 4 years qualifies as
short-term.
The Fund will seek to maintain a dollar-weighted average maturity consistent with that of
its target index. As of November 30, 2022, the target index had a dollar-weighted average
maturity of 3.06 years and, over the past ten years, the dollar-weighted average maturity of
the target index has not exceeded 3.5 years.
For these reasons, we believe the expected dollar-weighted average maturity of the index
and, therefore the expected dollar-weighted average maturity of the Fund, qualifies as
"short-term." And we believe that the name of the Fund is not misleading.
The disclosure has been revised accordingly.
Comment 2:
Prospectus
Comment:
The Principal Investment Strategy section includes disclosure that states "Each bond...
generally must be a constituent of a deal where the original offering amount was at least
$100 million; and generally have a minimum par amount of $25 million. In addition, to be
included in the Index, each bond must have a minimum term to maturity or call date greater
than one calendar month." For purposes of plain English disclosure, please revise this
language.
Response:
The disclosure has been revised accordingly.
Comment 3:
Prospectus
Comment:
The Fund's Principal Investment Strategy states that "Under normal circumstances, at least
80% of the Fund's assets will be invested in securities whose income will be exempt from
federal income taxes and the federal AMT." Please confirm that, for the purposes of the
Fund's 80% policy, the term "securities" includes bonds.
Response:
We confirm that for purposes of the Fund's 80% policy, the term "securities" includes
bonds.
Comment 4:
Prospectus
Comment:
Please confirm that the Fund's stated 80% policy includes "net assets plus borrowing."
Response:
We confirm that the Fund's stated 80% policy includes "net assets plus borrowing."
Comment 5:
Prospectus
Comment:
The SEC generally takes the position that a short-term bond fund should have a dollar-
weighted average maturity of less than 3 years. Please add disclosure clarifying that the
Fund's target index will have a dollar-weighted average maturity of less than three years.
Response:
The adopting release for Rule 35d-1 states that the purpose of the rule is to prevent
investment companies from adopting names that could mislead investors about a fund's
investments and risks. In the adopting release and subsequent FAQ, the SEC provided
guidance that the dollar-weighted average maturity for a short-term bond fund should not
exceed 3 years. The text of the rule, however, does not require a 3-year average maturity
for short-term funds. We believe that under any reasonable interpretation of the adopting
release and Rule 35d-1, a dollar-weighted average maturity range up to 4 years qualifies as
short-term.
As of November 30, 2022, the target index had a dollar-weighted average maturity of 3.06
years and, over the past ten years, the dollar-weighted average maturity of the target index
has not exceeded 3.5 years.
For the reasons discussed here and in the response to Comment 1, we believe that the
expected dollar-weighted average maturity of the index qualifies as "short-term."
The disclosure has been revised accordingly.
Comment 6:
Prospectus
Comment:
To the extent not already disclosed, please add disclosure to the Fund's prospectus
regarding (a) the index component selection criteria, explaining how index components are
included or excluded, (b) the index rebalance and reconstitution process, including the
frequency thereof, (c) the index weighting methodology, and (d) the number of index
components.
Response:
The disclosure has been revised accordingly.
Comment 7:
Prospectus
Comment:
Please consider adding "concentration risk" and "passive investment risk" to the Fund's
prospectus or explain why they are not necessary.
Response:
While the Fund is permitted to concentrate to the extent necessary to approximate the
composition of its target index, this is not currently considered to be part of the Fund's
principal investment strategies or principal risks.
We believe that the explanation in the section called "Investing in Index Funds" about the
investment strategy of indexing provides investors with relevant information about index
investing and passive investment strategies generally. For example, this section clearly
states that an index fund generally does not perform exactly like its target index and that
since market indexes do not have operating expenses and transaction costs, they will
usually have a slight performance advantage over funds that track them. We also note that
the Glossary of Investment Terms contains definitions of "Indexing."
Comment 8:
Statement of Additional Information
Comment:
Please revise the Fund's fundamental policies to align with the Fund's stated strategy of
investing at least 80% of its assets in securities whose income will be exempt from federal
income taxes and the federal AMT.
Response:
The disclosure has been revised accordingly.
Comment 9:
Statement of Additional Information
Comment:
Please note that the Fund should look through a private activity municipal debt security
whose principal and interest payments are derived principally from the assets and revenues
of a non-governmental entity in order to determine the industry to which the investments
should be allocated when determining the Fund's compliance with its concentration
policies.
Response:
We confirm that the Fund will look through a private activity municipal debt security
whose principal and interest payments are derived principally from the assets and revenues
of a non-governmental entity in order to determine the industry to which the investments
should be allocated when determining the Fund's compliance with its concentration policies.
Please contact me at anthony_coletta@vanguard.com with any questions or comments regarding the above response.
Sincerely,
/s/ Anthony Coletta
Anthony Coletta
Assistant General Counsel
The Vanguard Group, Inc.