SHIP LOGO VANGUARD/(R)/
P.O. Box 2600
Valley Forge, PA 19482-2600
610-669-1538
Judy_L_Gaines@vanguard.com
April 17, 2006
Christian Sandoe, Esq.
Division of Investment Management
U.S. Securities and Exchange Commission via electronic filing
450 Fifth Street,
N.W., Fifth Floor
Washington, D.C. 20549
RE: Vanguard Quantitative Funds
Dear Mr. Sandoe,
The following responds to your comments of April 10, 2006 on the
post-effective amendment of the registration statement of the above-referenced
registrant. You commented on Post-Effective Amendment No. 25 that was filed on
February 22, 2006.
Comment 1: Prospectus - Primary Risks
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Comment: Replace references to small-cap risk with that of large-cap
risk.
Response: We will make the requested revision.
Comment 2: Prospectus - Performance/Risk Information
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Comment: Remove the sentence that points an investor toward the
Supplemental Performance Information section of the
prospectus for more information.
Response: We have considered the comment and plan to keep a modified
version of the sentence in this section. General Instruction
C.2.(a) of Form N-1A says "cross-references with the
prospectus are most useful when their use assists investors in
understanding the information presented and does not add
complexity to the prospectus." In keeping with the spirit of
this instruction, we think that it benefits an investor
looking at the Item 2 disclosure to know that farther back in
the prospectus there is related information. However, it is
not our intention to mislead an investor into thinking that
the information in the back of the prospectus is performance
of this Fund.
Accordingly, we will amend the sentence to read, "Please refer
to the Performance of a Different but Similar Investment
Vehicle section of this prospectus for information on the
performance of a different but similar investment vehicle."
Christian Sandoe, Esq.
April 17, 2006
Page 2
Comment 3: Prospectus - Security Selection
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Comment: Include the capitalization range within which the Fund will
invest.
Response: We will add the requested disclosure.
Comment 4: Prospectus - Market-Timing
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Comment: Each Fund's broad policies with respect to frequent trading
and market-timing are disclosed under the heading "Frequent
Trading or Market-Timing." However, specific policies
applicable to discrete types of investors are disclosed in
various places throughout the "Investing with Vanguard"
section. All of each Fund's policies concerning frequent
trading and market-timing should be disclosed together under
the heading "Frequent Trading and Market-Timing."
Response: We believe that each Fund's policies against frequent trading
and market-timing are properly disclosed in the prospectus
pursuant to Item 6(e)(4) of Form N-1A. Item 6(e)(4) does not
require that the specific policies applicable to each type of
shareholder be disclosed together in the prospectus. As such,
we believe that it is appropriate to have the general
discussion of each Fund's policies against frequent trading
and market-timing under the heading "Frequent Trading or
Market-Timing" with a reference to the "Investing with
Vanguard" section where specific policies applicable to
different types of shareholders and transactions are
disclosed.
We believe that removing the disclosure from the "Investing
with Vanguard" section and combining the disclosure into a
single "Frequent Trading and Market-Timing" section would make
the discussion of transaction policies incomplete in the
"Investing with Vanguard" section. Repeating the specific
policies in both the "Investing with Vanguard" section and
under the "Frequent Trading and Market-Timing" heading would
unnecessarily clutter the prospectus with duplicative
disclosure.
Comment 5: Prospectus - Investment Advisor
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Comment: Please include disclosure directing investors where to look
for a discussion on why the board of trustees approved the
Fund's advisory agreement.
Response: We will make the requested revision.
Comment 6: Prospectus - Plain Talk About the Fund's Portfolio Manager
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Comment: Please clarify the PM's experience over the past 5 years.
Response: We will make the requested revision.
Comment 7: Prospectus - Supplemental Performance Information
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Comment: Please revise the heading of this section to clarify that the
performance shown is not that of this Fund.
Christian Sandoe, Esq.
April 17, 2006
Page 3
Response: We will change the heading of this section to "Performance of
a Different but Similar Investment Vehicle."
Comment 8: Prospectus - Supplemental Performance Information
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Comment: Clarify what is meant by "an affiliate" of the Fund's adviser
manages an "entity..." and disclose that the comparable
entity's investment policies are identical to those of the
Fund.
Response: We will make the requested clarification and revisions.
Comment 9: Prospectus - Supplemental Performance Information
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Comment: In the second paragraph beneath this heading, reverse the
order of the discussion. Rather than discussing the Fund
and how it differs from the Trust, start with the Trust, and
discuss how it differs from the Fund.
Response: We will make the requested revisions.
Comment 10: Prospectus - Supplemental Performance Information
- -------------------------------------------------------------------
Comment: In disclosing supplemental performance in reliance on
Nicholas-Applegate, a Fund must show the composite performance
of all of an adviser's accounts that are managed with
investment objectives, policies, and strategies substantially
similar to those used in managing the Fund.
Response: Our disclosure complies with this requirement. We have only
shown performance of the Structured Large Cap Equity Trust
because that is the only entity of any sort (RIC, separate
account, commingled trust) that Vanguard manages that has
investment objectives, policies, and strategies that are
similar to that of the Fund. There are no other entities whose
inclusion would be appropriate in this section.
Comment 11: SAI - Investment Policies
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Comment: Revise the 80% policy for the Fund to reference large-cap
stocks.
Response: We will make the requested revision.
Comment 12: SAI - Investment Advisor
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Comment: The detail regarding the Fund's advisory fee structure (base
and performance fee structure) should be included in the SAI.
Response: We do not plan to include this information in the SAI for this
Fund or in other the SAIs of our other registrants.
Vanguard operates a multi-manager structure for certain funds
pursuant to an exemptive order granted by the Commission in
2003 (the "2003 Order").(1) The funds are permitted under the
2003 Order to enter into and amend investment advisory
agreements with unaffiliated third-party advisors without
shareholder approval, provided certain conditions are met. The
2003
(1) In the Matter of Vanguard Convertible Securities Fund, et al., File No.
812-12380, Inv. Co. Act Release Nos. 26062 (May 29, 2003) (Notice) and 26089
(June 25, 2003) (order).
Christian Sandoe, Esq.
April 17, 2006
Page 4
Order exempts multi-managed Vanguard funds from certain
disclosure requirements so that they are only required to
disclose advisory fees (as both a dollar amount and as a
percentage of a fund's net assets) as follows: (1) aggregate
fees paid by a fund to Vanguard and any affiliated advisors;
(2) aggregate fees paid by the fund to unaffiliated
third-party advisors; and (3) aggregate fees paid by the fund
to all investment advisors (collectively, the "Aggregate Fee
Disclosure"). A fund using Aggregate Fee Disclosure does not
have to include additional details, including asset-based and
performance fee schedules, about its advisory fees and fee
arrangements.
An Aggregate Fee Disclosure regime is in the best interests of
Fund shareholders. In a recent proposal to codify
multi-manager exemptive orders, the Commission said that fund
sponsors (including Vanguard) have represented that they "are
able to negotiate lower fees with subadvisers if they do not
have to disclose those fees separately, and in our orders we
have provided them relief from our disclosure requirements. We
are proposing to codify this relief, which permits a manager
of managers fund to disclose only the aggregate amount of
advisory fees that it pays to subadvisers as a group."(2)
Comment 13: SAI - Material Conflicts of Interest
- ------------------------------------------------------
Comment: Please describe what Franklin Portfolio Associates considers
to be material conflicts of interest.
Response: We will make the requested revisions.
Comment 14: SAI - Description of Compensation
- ---------------------------------------------------
Comment: Please expand on the discussion of Franklin Portfolio
Associates by specifying what peer groups and benchmarks it is
compared to in determining compensation.
Response: We will make the requested revisions.
Comment 15: SAI - Ownership of Securities
- -----------------------------------------------
Comment: Disclose Mr. Troyer's ownership of shares of the Structured
Large-Cap Equity Fund.
Response: The Fund has not yet commenced operation, but we will disclose
that Mr. Troyer owns no shares.
Comment 16: Tandy Requirements
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Comment: The SEC is now requiring all registrants to provide at the end
of response letters to registration statement comments, the
following statements:
o The Fund is responsible for the adequacy and accuracy of the
disclosure in the filing.
o Staff comments or changes in response to staff comments in
the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the
filing.
o The Fund may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under
the federal securities laws of the United States.
(2) Exemption from Shareholder Approval for Certain Subadvisory Contracts,
Securities Act Release No. 8312 (Oct. 23, 2003).
Christian Sandoe, Esq.
April 17, 2006
Page 5
Response: As required by the SEC, we will provide the foregoing
acknowledgements.
* * * * *
As required by the SEC, the Fund acknowledges that:
o The Fund is responsible for the adequacy and accuracy of the
disclosure in the filing.
o Staff comments or changes in response to staff comments in
the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the
filing.
o The Fund may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under
the federal securities laws of the United States.
Please contact me at (610) 669-1538 with any questions or comments
regarding the above responses. Thank you.
Sincerely,
Judith L. Gaines
Associate Counsel
Securities Regulation, Legal Department