quarterly review vanguard target retirement …...quarterly focus executive summary tim buckley...

1

Q U A R T E R L Y R E V I E W

VanguardTarget Retirement Funds and TrustsMarch 31, 2020

22 For institutional and sophisticated investors only. Not for public distribution

Q U A R T E R L Y F O C U S

Executive summary 3

The SECURE Act’s impact on target-date fund design 4

TDFs taking the front seat toward favorable retirement outcomes 5

T D F I N D U S T R Y A N D M A R K E T O V E R V I E W

Industry growth and market share 7

Market environment 8

F U N D P E R F O R M A N C E

Vanguard fund performance and attribution 9

Vanguard product design 14

Industry peer-group comparison 16

A P P E N D I X

Absolute performance results 19

C O N T E N TS Edition 24

For institutional and sophisticated investors only. Not for public distribution


Executive summary

Tim BuckleyVanguard Chairman

and CEO

* Source: Vanguard data as of February 1–March 20, 2020.

These are unprecedented times. We are living with the stress and challenges of a global

health crisis combined with an orchestrated economic slowdown to lessen the spread

of COVID-19.

In my nearly 30 years at Vanguard, I’ve seen a lot of volatility, but this crisis is different.

The equity markets plummet one day and bounce back the next as investors try to process

the uncertainty surrounding the coronavirus outbreak. We’ve seen liquidity issues in

unexpected areas of the bond market such as Treasuries, munis, and long-term investment-

grade. Fortunately, markets have stabilized in recent weeks, although we know this crisis

is far from over.

The global economy is most likely already in a recession, and we expect negative growth for

the year. However, we expect that the worst of the economic disruptions will have passed by

the end of the second quarter, allowing global economies to start to recover in the second

half of 2020.

Keep in mind that the markets are forward-looking and much of this news is already priced in. It is possible equity

markets could get worse if the slowdown extends further, but also realize that the markets will rebound far before

economic data improves. The markets are close to impossible to time, and investors won’t want to miss those rebounds.

Fortunately, Vanguard investors know what it means to “stay the course.” Focusing on investment goals, keeping a

long-term perspective, being both balanced across and diversified within asset classes, and limiting cost are time-tested

ways for investors to weather even the stormiest of markets.

When we look at our investors’ behavior, we’re seeing this long-term strategy in action. Healthy cash flows continue

to come into the funds. And only 3% of investors are executing trades. That percentage is only 1% for participants with

target-date funds as their sole investment.* And, only 0.4% of participants have reacted and moved to cash.

As we enter what is expected to be a challenging period for our global economy, please know that Vanguard is here

to serve you. Our equity and fixed income teams continue to manage our clients’ portfolios in the same way they have

before: with discipline, equanimity, and a long-term client orientation. Our client service teams are prepared to support

you as we too practice social distancing through remote working arrangements. And, our research and economic teams

are consistently providing updated perspective on the market environment and what it means for you.

Thank you for entrusting us with your financial success. No matter the market conditions, we value your partnership and

look forward to helping you achieve your investment goals.

Sincerely,

https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/InvComRebalancingWithTargetRetirement?cmpgn=IIG:THLDR:TRFS:TRFQQ120:PRT:PDF:XX:TL:IIH:CLNT:GENSRV:5:20200504:XX:XX

4For institutional and sophisticated investors only. Not for public distribution4


The SECURE Act’s impact on target-date fund design

The SECURE Act was signed into law at the end of 2019 and

represents the most comprehensive change to the retirement

landscape since the Pension Protection Act (PPA) of 2006.

Among its nearly 40 wide-ranging provisions, one that

became effective this year raises the age for required

minimum distributions (RMDs) from 70½ to 72.

This might lead to the question: Will there be any changes

to the Vanguard Target Retirement Fund glide path? The

answer, for the moment, is "no.”

Ensuring glide-path suitability

At Vanguard, we continually assess the glide path to ensure

it's designed to meet the needs of the intended investor base

and represents our best investment thinking.

As part of this due diligence, we regularly analyze the latest

participant population characteristics—savings rates,

spending requirements, compensation, retirement age, and

other variables—alongside long-term asset-class return

assumptions from the Vanguard Capital Markets Model®.

In addition, we also assess any major changes to regulatory

requirements, such as those found in the SECURE Act.

Understanding when wealth accumulation

becomes spending

One element that we evaluate through this process is whether

the glide path’s landing point—the place at which the glide path

reaches its final and most conservative asset allocation—

matches real-world participant behaviors and spending needs.

Looking at investor withdrawal behavior across age cohorts,

we observe that assets held in tax-deferred portfolios are not

withdrawn in meaningful amounts at the industry’s standard

retirement age of 65. In fact, as we show in Exhibit 4.1,

withdrawals from these portfolios do not rise significantly until

investors reach their early 70s.

This spending behavior is partly driven by the changing picture

of retirement—individuals may no longer work full time but still

have some regular income from part-time work in addition to

Social Security. The other driving factor is RMDs, which began

at 70½ until the passage of the SECURE Act.

With the shift in RMDs from age 70½ to 72, it’s reasonable to

think that the spike in withdrawals could move marginally

relative to the current observed behavior. However, given the

existing alignment of withdrawals near the early 70s, we would

not expect the change to be significant.

Assessing the impact on the glide path

This brings us to why we’re not making any changes to the

Vanguard Target Retirement Fund glide path.

Our glide path currently follows a "through" approach, reaching

its landing point and most conservative asset allocation at age

72—seven years past the standard target-date retirement age

of 65. The aim of this approach is to better align the asset

allocation mix with investor spending behaviors, including the

observed withdrawal trends previously discussed. The shift in

the RMD age to 72 aligns well with our existing glide-path

design. We might even see a better "fit" relative to withdrawal

behavior going forward.

As with any major regulatory change, it can take some time

before the impact becomes fully evident in the data. We’ll

continue to monitor changes in investor behavior through our

ongoing due diligence process. And, if necessary, we will take

action to ensure that we continue to provide a glide path that

best aligns with investor needs.

Exhibit 4.1 Percentage of traditional IRA investors

with withdrawals

5.8% 6.6% 7.3% 7.8% 8.7% 9.9% 10.8%

18.8%

24.9%

72.2%

84.9%

0%

20%

40%

60%

80%

100%

25 to29

30 to34

35 to39

40 to44

45 to49

50 to54

55 to59

60 to64

65 to69

70 to74

75 orolder

Age

Source: Proctor, Daniel C. and Jean A. Young. Retirement Distribution Decisions Among DC Participants, September 2019. The Vanguard Group.

5



Some weeks ago an evening news program showed a video

shot by someone driving alongside an electric car. Inside, the

driver and front-seat passenger were fast asleep, their heads

slumped against the side window or on their chest. The car

was clearly on autopilot, staying in its lane and maintaining a

constant speed. We presume the self-driving car took its two

occupants safely home, as there was no follow-up news

report on a car wreck in this case.

While it’s definitely not prudent (never mind illegal!) to sleep

behind the wheel, a vehicle that can help take someone

safely to their destination is an attractive asset. The older

I get, the less I like to drive at night. The headlights on the

other cars bother me more than they used to. I find the

autopilot feature appealing, and perhaps it’s one reason

among many why the latest electric cars with this feature are

incrementally making headway in automotive market share.

Similarly, part of the allure of target-date funds (TDFs) is their

implied potential to take you to your destination—in this case

a financially secure retirement—with little intervention by the

investor and with little drama. (Keep in mind that although

TDFs simplify the investment process, they still involve risk

and investors should reevaluate their fund selection

periodically or if their projected retirement year changes.) The

evidence seems to support the benefits of TDFs: One study

estimates that the adoption of low-cost TDFs may enhance

retirement wealth by as much as 50% over a 30-year

horizon.*

Intuitively, investors seem to know that TDFs can shape their

retirement outcomes for the better, based on TDFs’ rapidly

growing popularity.

Participants are piling into TDFs voluntarily

TDFs’ market dominance in the defined contribution (DC)

space dwarfs anything that electric cars have achieved in

their respective market. As of year-end 2019, 98% of all plan

participants in Vanguard-administered DC plans have access

to TDFs, and 8 in 10 participants do use TDFs. More than

half (54%) of plan participants have their entire account

invested in a single TDF.

29%

40%

1%

<0.5%

14%

16%

n Voluntary enrollment pure investors holding a single target-date fund

n Automatic enrollment pure investors holding a single target-date fund

n Reenrolled pure investors holding a single target-date fund

n Reenrolled mixed investors holding a single target-date fund

and other funds

n Automatic enrollment mixed investors holding a target-date and other

funds

n Voluntary enrollment mixed investors holding a target-date and other

funds

So even those who were not nudged into a TDF by plan

design chose to do so. During 2019, 83% of new plan

entrants invested in a single TDF. Participants know a good

thing when they see it.

* From the NBER working paper Target Date Funds and Portfolio Choice in 401(k) Plans by Olivia S. Mitchell, a professor at the University of

Pennsylvania's Wharton School, and Stephen Utkus, Vanguard's global head of investor research. National Bureau of Economic Research. January

2020. The baseline was a hypothetical 30-year-old participant earning $35,000 a year and saving 10%; this would generate $300,000 over 30 years,

assuming a mean excess return of 5.4% that was typical for the time period under study. The authors estimated a participant in a single low-cost

TDF would have an end balance 50% higher.

TDFs taking the front seat toward favorable retirement outcomes

Exhibit 5.1 Breakdown of TDF participants

I know what you’re thinking: This is only because of

autoenrollment into qualified default investments such as TDFs.

Left to their own devices, participants would not have poured into

TDFs on their own.

But Exhibit 5.1 below tells a different story. It’s true that roughly

54% of the participants did go into a TDF (either solely a TDF or

a mix of TDF and other funds) because of autoenrollment. But

45% enrolled in a TDF voluntarily.

Source: Data from Vanguard-administered DC plans as of December 31, 2019.

6For institutional and sophisticated investors only. Not for public distribution6


Participants in single TDF Do-it-yourself participants

Of course, the outliers in the DIY chart might initially seem

very attractive. Who wouldn’t want 20% annualized returns?

But that’s ignoring that the bulk of the outcomes fall below

the natural trend line—in other words, they’re taking on far

more risk than warranted by the returns. The color-coded

dots indicate that a surprisingly high number of these were

older participants, who may not be able to afford to take on

such risk.

While the scatter plot for single-TDF participants might

seem initially boring, the narrow range of outcomes is

indicative of the mission of TDFs (especially those using

indexed products) to deliver reasonable returns without

taking undue risk relative to the broad financial markets.

Using the car analogy, if your destination was Chicago and

you end up in Milwaukee because of a navigational glitch,

you would be happier with that outcome than ending up in

Camden, New Jersey, or Oakland, California. Driving the extra

92 miles from Milwaukee is an easier correction than driving the

770 or 2,125 miles from Camden or Oakland, respectively.

When it comes to investing, you do not want nasty surprises.

Like autopilot, TDFs have reshaped the retirement landscape

by lessening the need for active intervention on the participant’s

part. Now, if TDFs could also do laundry and dishes, we'd be

all set.

0%

5%

10%

15%

20%

0% 5% 10% 15% 20% 25%

Non-U.S. stocks

U.S. stocks

U.S. bonds

Five-year annualized standard deviation

Fiv

e-y

ea

r a

nn

ua

lize

d to

tal re

turn

0%

5%

10%

15%

20%

0% 5% 10% 15% 20% 25%

Non-U.S. stocks

U.S. stocks

U.S. bonds

Five-year annualized standard deviation

Fiv

e-y

ear

annualiz

ed t

ota

l re

turn

l Younger than age 35 l Ages 35 to 55 l Older than age 55

Each panel includes 1,000 random samples of participant accounts drawn from respective samples. Each panel excludes ½% top and ½% bottom outliers for both risk and

return, for a net sample of 980 observations in each panel. Past performance is no guarantee of future returns.

Source: Vanguard, 2020.

Exhibit 6.1 Risk and return characteristics for DC plan participants during five years through 2019

Steering participants to the right destination

In aggregate, participants going into TDFs should lead to better outcomes, if the past is any indicator. Exhibit 6.1 shows the

risk-return dispersion of outcomes for single-TDF investors versus do-it-yourself (DIY) investors during the five-year period through

year-end 2019. (The DIY participants were those not invested solely in a TDF, balanced fund, or managed account.)

TDFs taking the front seat toward favorable retirement outcomes

Jean A. Young, CPAMs. Young is a senior investment strategist in Vanguard Investment Strategy Group.



According to data from Morningstar combined with Vanguard’s funds and trusts data, industry assets dipped below

$2 trillion in assets as of the end of Q1 2020. Vanguard continued to lead the industry in cash flow and assets under

management, receiving an estimated 43 cents of every dollar invested in a target-date fund over the last 12 months.

The industry’s top providers—Vanguard, Fidelity, BlackRock, T. Rowe Price, JPMorgan, American Funds, and State

Street—hold a cumulative 87% share of all industry assets, or more than $1.66 trillion as of March 31, 2020.

We estimate that as of the end of March, the target-date fund industry experienced a 6.3% organic growth rate over

the past 12 months.*

Industry growth and market share

Sources: Vanguard, Morningstar, as of March 31, 2020. Public company data also used prior to 2020.* Organic growth measured as current period’s net new flows divided by prior period’s ending assets.

n Vanguard n Fidelity n T. Rowe Price n BlackRock

n JPMorgan n American Funds n State Street n Other

Market shareGrowth of target-date fund industry assets

$-

$400

$800

$1,200

$1,600

$2,000

$2,400

2001 2005 2009 2013 2017

Bil

lio

ns

2020

13%

3%

-2%

4%

-1%

7%

17%

9%

24%

12% 3%

14%

12%

38%43%

AUM1-year

cash flow

8



• REITs, domestic equities, and international equities were all down over -20% in the first quarter, a significant

reversal relative to the strong positive returns of each asset class in 2019.

• Domestic fixed income was the best performing major asset class during the first quarter of 2020. Of the major

asset classes, only domestic fixed income, international fixed income and cash were positive over the quarter.

• High-yield, emerging market bonds, and commodities all experienced negative returns during the quarter,

contributing to a negative return for each asset class over the one year period.

Market environment

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular

investment, as you cannot invest directly in an index.

Sources: Vanguard, Bloomberg Barclays Live, and Morningstar, as of March 31, 2020.* MSCI U.S. Broad Market Index used as a proxy for 10-year returns.

** Back-tested data provided by Bloomberg Barclays for periods prior to 2013.

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Q2

2019

Q3

2019

Q4

2019

Q1

2020

REIT

28.5

EMB

8.8

EMB

18.3

CRSP

33.6

REIT

30.4

REIT

2.5

HYB

17.1

FTSE

27.4

IAGG

3.2

CRSP

30.8EMB

4.5

REIT

7.7

FTSE

9.3

AGG

3.1

CRSP

17.3

REIT

8.7

REIT

17.8

FTSE

15.6

CRSP

12.6

IAGG

1.3

CRSP

12.7

CRSP

21.2

CASH

1.9

REIT

25.8CRSP

4.1

IAGG

3.1

CRSP

9.0

CASH

0.4

COM

16.8

AGG

7.8

FTSE

17.6

HYB

7.4

IAGG

9.1

EMB

1.3

COM

11.4

EMB

9.2

STPS

0.6

FTSE

21.8AGG

3.1

AGG

2.3

COM

4.0

IAGG

0.2

HYB

15.1

HYB

5.0

CRSP

16.2

REIT

2.5

EMB

7.1

AGG

0.5

EMB

9.2

HYB

7.5

AGG

0.0

HYB

14.3IAGG

3.0

HYB

1.3

HYB

2.6

STPS

–0.7

FTSE

13.0

STPS

4.5

HYB

15.8

IAGG

1.3

AGG

6.0

CRSP

0.4

REIT

8.6

REIT

5.1

HYB

–2.1

EMB

14.1FTSE

2.9

CRSP

1.1

EMB

2.0

EMB

–11.4

EMB

12.1

IAGG

4.0

IAGG

7.3

CASH

0.1

HYB

2.5

CASH

0.0

IAGG

4.9

AGG

3.5

EMB

–3.9

AGG

8.7HYB

2.5

EMB

0.8

STPS

1.1

HYB

–12.7

AGG

6.5

CRSP

1.1

AGG

4.2

STPS

–1.6

CASH

0.0

STPS

0.0

FTSE

4.7

IAGG

2.6

REIT

–4.6

IAGG

8.1STPS

1.6

CASH

0.6

CASH

0.5

CRSP

–20.9

STPS

3.3

CASH

0.1

STPS

2.4

AGG

–2.0

STPS

–1.1

FTSE

–4.3

STPS

2.8

STPS

0.9

CRSP

–5.2

COM

5.4REIT

1.3

STIPS

0.3

AGG

0.2

COM

–23.5

IAGG

3.2

COM

–13.3

CASH

0.1

EMB

–6.3

FTSE

–3.4

HYB

–4.5

AGG

2.6

CASH

0.8

COM

–13.0

STPS

4.9CASH

0.6

FTSE

–1.7

REIT

–0.8

FTSE

–24.0

CASH

0.1

FTSE

–14.2

COM

–1.1

COM

–9.5

COM

–17.0

COM

–24.7

CASH

0.3

COM

0.7

FTSE

–14.6

CASH

2.3COM

–1.8

COM

–2.4

IAGG

–1.2

REIT

–27.0

Average annualized return

Index returns

Q1

2020

One

year

Three

years

Five

years

Ten

years

TRF

building

blocks

CRSP CRSP U.S. Total Market Index* –20.9 –9.2 4.0 5.7 10.2

FTSE FTSE Global All Cap ex U.S. Index –24.0 –16.0 –2.3 –0.5 2.3

AGG Barclays U.S. Aggregate Bond Index 3.1 8.9 4.8 3.4 3.9

IAGG Barclays Global Agg ex U.S. Float Adj RIC Cap Index Hedged** 0.2 5.0 4.6 3.6 4.2

STPS Barclays U.S. 0–5 Year TIPS Index –0.7 2.4 1.6 1.6 1.5

Other

indexes

CASH 3-Month T-Bill 0.4 2.0 1.7 1.1 0.6

HYB Bloomberg Barclays U.S. Corporate High Yield Index –12.7 –6.9 0.8 2.8 5.6

EMB Bloomberg Barclays Emerging Markets Sovereign Index USD –11.4 –4.7 0.8 2.9 5.0

REIT MSCI U.S. REIT Index –27.0 –21.0 –3.0 –0.4 7.4

COM Bloomberg Commodity Index –23.5 –23.7 –10.2 –8.8 –7.3

Index returns ranked by performance




Fund performance through March 31, 2020

The performance data shown represents past performance. Past performance is no guarantee of future results. Investment returns and principal

value will fluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher

than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance. Some

funds assess purchase, redemption, and/or account maintenance fees. The performance data shown do not reflect deduction of these fees. If they

did, performance would be lower. Details on these fees and adjusted performance figures can be found in the fund detail section.

Sources: Vanguard and Morningstar, as of March 31, 2020.

Portfolio/BenchmarkQ1

2020 1 year 3 years 5 years 10 years

Since

inception

Inception

date

Vanguard Target Retirement Income Fund

Investor Shares –5.91 0.91 3.38 3.17 4.92 4.90 10/27/2003

Institutional Shares –5.88 0.92 3.42 — — 3.51 6/26/2015

Trust I –5.90 0.96 3.45 3.23 5.00 4.64 6/22/2007

Target Retirement Income Composite Index –5.56 1.43 3.67 3.41 5.10 — —

Vanguard Target Retirement 2015 Fund

Investor Shares –7.44 –0.22 3.61 3.55 6.03 5.66 10/27/2003

Institutional Shares –7.39 –0.10 3.67 — — 3.76 6/26/2015

Trust I –7.40 –0.09 3.67 3.63 6.10 4.56 6/28/2007

Target Retirement 2015 Composite Index –7.04 0.42 3.93 3.83 6.21 — —


Investor Shares –10.76 –2.64 3.28 3.58 6.39 5.48 6/7/2006


Trust I –10.73 –2.57 3.36 3.66 6.48 4.62 6/22/2007

Target Retirement 2020 Composite Index –10.27 –1.97 3.65 3.88 6.67 — —


Investor Shares –12.95 –4.31 3.07 3.60 6.65 5.97 10/27/2003


Trust I –12.92 –4.17 3.17 3.71 6.74 4.54 6/28/2007



Investor Shares –14.76 –5.78 2.80 3.56 6.87 5.55 6/7/2006


Trust I –14.71 –5.66 2.90 3.66 6.96 4.46 6/28/2007



Investor Shares –16.52 –7.25 2.53 3.51 7.07 6.33 10/27/2003


Trust I –16.47 –7.16 2.62 3.62 7.18 4.49 6/28/2007


Vanguard Target Retirement Fund and Trust performance



Fund performance through March 31, 2020

The performance data shown represents past performance. Past performance is no guarantee of future results. Investment returns and principal

value will fluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher

than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance. Some

funds assess purchase, redemption, and/or account maintenance fees. The performance data shown do not reflect deduction of these fees. If they

did, performance would be lower. Details on these fees and adjusted performance figures can be found in the fund detail section.



Portfolio/BenchmarkQ1


Since

inception

Inception

date


Investor Shares –18.25 –8.74 2.23 3.43 7.18 5.67 6/7/2006


Trust I –18.20 –8.63 2.33 3.53 7.28 4.60 6/28/2007



Investor Shares –19.88 –10.21 1.77 3.21 7.07 6.52 10/27/2003


Trust I –19.84 –10.10 1.87 3.31 7.17 4.49 6/28/2007



Investor Shares –19.86 –10.17 1.79 3.23 7.07 5.62 6/7/2006


Trust I –19.83 –10.09 1.87 3.30 7.18 4.54 6/28/2007



Investor Shares –19.89 –10.21 1.78 3.19 — 7.88 8/18/2010


Trust I –19.83 –10.09 1.87 3.29 — 7.36 10/5/2010

Target Retirement 2055 Composite Index –19.47 –9.51 2.19 3.57 — — —


Investor Shares –19.86 –10.18 1.79 3.20 — 7.19 1/19/2012


Trust I –19.79 –10.02 1.89 3.31 — 6.73 3/1/2012

Target Retirement 2060 Composite Index –19.47 –9.51 2.19 3.57 — — —


Investor Shares –19.92 –10.23 — — — 0.27 7/12/2017

Institutional Shares –20.01 –10.25 — — — 0.35 7/12/2017

Trust I –19.83 –10.10 — — — 1.43 7/21/2017

Target Retirement 2065 Composite Index –19.47 –9.51 1.70 — — — —

Vanguard Target Retirement Fund and Trust performance (continued)



In addition to low cost and broad global diversification, greater transparency is a key benefit of a target-date fund

implemented with index funds. With only four to five underlying primary asset classes, plan sponsor oversight and

communication of performance results to participants involves fewer moving parts.

The 12-month performance was positive for the income fund, but negative across all other vintages, largely driven

by poor U.S. and international equity returns, with investors early in the glide path experiencing the largest

negative contribution. Performance later in the glide path was aided by a higher weight in investment grade fixed

income, as both the U.S. and non-U.S. (hedged) fixed income building blocks providing a positive return over the

12-month period.

Underlying fund performance contribution

Past performance is not a guarantee of future results.


12-month return contribution by underlying funds

n Total Stock Market Index n Total International Stock Index n Total Bond Market II Index

n Total International Bond Index n Short-Term Inflation-Protected Securities Index n Cash

Total return

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 Income



-100

-80

-60

-40

-20

0

20

2060 2055 2050 2045 2040 2035 2030 2025 2020 2015 Income

Basis

poin

ts

Excess return attribution



Over the trailing 12-month period, the benchmark-relative returns of the Target Retirement Funds were largely

driven by fund expenses, allocation impact (specifically on the vintages with higher equity allocations), and fair-

value pricing on the non-U.S. building block funds (described further below).

Relative returns over the past year experienced a sizable negative effect attributable to allocation impact, which

results from the differences between the target and actual allocations of each fund (which, in turn, are largely

influenced by major market movements and daily flows into and out of the funds). While the underlying funds

fluctuate within parameters established by our global rebalancing policy, the composite benchmarks assume daily

frictionless rebalancing. Large equity market fluctuations during the month of March were the primary contributor

to the larger than usual allocation deviations and accounted for the majority of the impact.

Perhaps the most difficult-to-predict driver of benchmark-relative return differences is the impact of fair-value

pricing on the two non-U.S. index funds included in the Target Retirement Funds and Trusts. Fair-value pricing is

required by the SEC to ensure that investors buying or selling fund shares do so at a value that best reflects all

available information as of 4 p.m., Eastern time, whereas the underlying international benchmarks are valued at

the local closing time—Tokyo, Hong Kong, London, etc.—for each regional market. The funds that are most

heavily invested in the Total International Stock Fund saw the most negative attributable return from this. The

month of March had significant fair-value pricing adjustments due to excessive global market volatility.

n Fair value n Residual n Cash impact n Underlying fund tracking difference ex-FV

n Allocation impact n Expense ratio Total net excess return

12-month return attribution

For institutional and sophisticated investors only. Not for public distribution. 13


Sources of tracking differences

Estimates based on internal proprietary models.

Sources and contributions to tracking differences

Fair value: Impact is determined by the market and can be large and volatile. Calculation is based on 12-month

rolling Total International Stock Investor Shares and Total International Bond Index Investor Shares data and is

adjusted for the proportion included in the Target Retirement Funds/Trusts.

Bond pricing: Derived from Total Bond Index II Investor Shares, Total International Bond Index Investor Shares,

and Short-Term Inflation-Protected Securities Index Investor Shares; adjusted for the proportion included in the

Target Retirement Funds/Trusts.

Expense ratio: As of March 2020.

Rebalancing: The impact is dependent on the performance of each underlying fund overweight/underweight

relative to the target allocation; a more volatile market could result in a higher variance.

Cash impact: Attribution analysis will capture most, but not all, of the impact of holdings and/or return movement

over time. For example, certain time periods may contain changes to the funds or composite benchmark that do

not necessarily coincide exactly to the day with one another.

Source Description Contribution to tracking differences

Ma

rke

t-

de

term

ined

va

ria

ble

s

Fair value International funds are fair-value priced as prescribed by the

SEC.

Bond pricing Bond index funds are priced at a different time than their

respective benchmarks.

Fix

ed

Expense ratio All else being equal, the Target Retirement Funds and Trusts will

trail their respective composite benchmarks by the amount of the

expense ratio.

Po

licy-d

rive

n

Rebalancing As a guideline, the underlying funds generally rebalance to within

50 basis points when they deviate from target allocations by 75

basis points. In contrast, the composite benchmark is rebalanced

daily exactly back to target allocations. This policy is designed to

deliver the risk/return characteristics of the portfolio while

minimizing trading costs.

Cash impact Small cash values may reside in the Target Retirement Funds

and Trusts as daily cash flow is invested. This is particularly a

factor in lower balance, newer funds.

Small

Impact

Large

Impact

Small

Impact

Large

Impact

Small

Impact

Large

Impact

Small

Impact

Large

Impact

Small

Impact

Large

Impact

Small

Impact

Large

Impact



Gradual changes since inception

2003:• Vanguard launched the Target

Retirement Funds utilizing the following

building blocks: Total Stock Market

Index Fund, European Stock Index

Fund, Pacific Stock Index Fund, Total

Bond Market Index Fund, Inflation-

Protected Securities Fund, and Prime

Money Market Fund.

• Expense ratio: 22 bps

2006:• Increased equity allocation across the glide

path by approximately 10%.

• Added exposure to Vanguard Emerging

Markets Index Fund.

• Expanded the target-date suite of funds to

include target retirement dates every five

years versus the initial funds which targeted

one retirement date every ten years.

• Expense ratio: 21 bps

2013:• Vanguard added a 20% nominal bond allocation to the

Vanguard Total International Bond Index Fund

(currency hedged).

• Replaced the full market Inflation-Protected Securities

Fund with the Short-Term Inflation-Protected

Securities Index Fund.

• Eliminated the Prime Money Market Fund, reallocating

the proceeds to other fixed income components.

• Expense ratio: 16–18 bps

2010:• Increased underlying

international equity allocation

from 20% to 30% of total equity.

• Replaced the three underlying

international equity index funds

(Europe, Pacific, and Emerging

Markets) with Vanguard Total

International Stock Index Fund.


2015:• Lowered costs by 13% for the

overall Target Retirement

Funds/Trusts franchise.

• Launched the 10 bps Institutional

Target Retirement Funds.

• Increased international allocations

by 10% in stocks and bonds to

60%/40% (U.S./ex-U.S.) for

stocks and 70%/30% for bonds.


Evolution of Vanguard’s glide-path design

* Target date is the year stated in the fund name. Target Retirement Fund allocations are based on a projected retirement age of 65.

The glide path today



The Strategic Asset Allocation Committee (SAA) has overall responsibility for the investment methodology of the Single Fund

and Advised Solutions. The purpose of the SAA Committee is to conduct an ongoing review and analysis of the investment

methodology of Vanguard’s Single Fund and Advised Solutions across the globe with the aim of a consistent global

investment methodology that incorporates local market considerations.

As depicted in the above chart, the SAA is responsible for the ongoing oversight and decision-making for Vanguard’s single-fund solutions.

The primary research groups that support the SAA’s oversight and research agenda are the Investment Strategy Group (portfolio

construction experts), Strategic Retirement Consulting (plan design experts), and Center for Investor Research (investor behavior experts).

Any changes to the Target Retirement Funds are ultimately approved by the Strategic Asset Allocation Committee, chaired by our global

chief economist, Joe Davis; the Global Investment Committee, chaired by our CEO, Tim Buckley, and Vanguard’s board of directors.

Effectively, this oversight structure translates into stability in terms of both philosophy and execution.

Process

SAA members

• Joe Davis, Ph.D.

Global Chief Economist [Chair]

• Greg Davis, CFA {ex–officio}

Global Chief Investment Officer

• Matthew Brancato, CFA, CPA

Head of Portfolio Review

• Manish Nagar

Head of Risk Management Group

• Roger Aliaga-Díaz, Ph.D.

Head of Vanguard Capital Markets Model®

• Francis Kinniry, CFA

Head of Portfolio Construction

• Paul Jakubowski

Global Head of Fixed Income Indexing

Head of Investments, Europe

• James Martielli, CFA

Head of Investment Solutions

• Daniel Reyes, CFA

Head of Investments, Asia-Pacific

• Rodney Comegys

Head of Equity Index Group

SAA Committee

Ongoing oversight and

decision-making

Experts in portfolio

construction, plan design,

and investor behavior

Senior management

Review and approval

Portfolio managers are responsible for ongoing monitoring and rebalancing

Strategic Asset Allocation Committee

As of March 2020.

Purpose



• Vanguard's sub-asset allocations are purely strategic and don’t include a tactical or dynamically managed component.

• For total equity and bond exposures, Vanguard Target Retirement Funds/Trusts are positioned similarly to the industry

average and other top providers. In 2015 the Vanguard Target Retirement Funds/Trusts increased international exposures

for both equities and bonds.

• Greater differentiation across TDF providers exists among fixed income holdings. Specifically, other TDFs provide less

exposure to international bonds and a bias toward lower-quality bonds.

• In 2015 Vanguard Target Retirement Funds/Trusts transitioned to higher international exposures. Previously, international

stock allocations were 30% of total equity exposure, and international bond allocations were 20% of total bond exposure.

Global market capitalization would suggest approximately 50% and 60% allocations, respectively. We believe country risk

is idiosyncratic and the global portfolio is the efficient frontier; however, Vanguard deviates from global market cap for

reasons such as investor preference for home bias, costs, liquidity, and regulatory constraints.

Sub-asset allocation comparison

Sources: Morningstar data, based on most recent holdings disclosure for each fund included in the calculation. As-of dates may vary depending on the timing and frequency of data madeavailable to Morningstar.

Average fixed income sub-asset allocations

n Industry average n Vanguard n Fidelity Freedom n BlackRock LifePath Index

n T. Rowe Price n State Street n American Funds

Average equity sub-asset allocations

30%

4%

13%

89%

30%

9%

31%

100%

2%7%

79%

25%

Averagefixed income

exposure

Average int'lfixed income

exposure

Int'l fixed income(%) of

total bond

Invest. grade(%) of

total bond

64%

24%

37%

72%

28%27%

40%

79%

21%

76%

64%

24%

33%

87%

13%

Averageequity

exposure

Avg. int'lequity

exposure

Int'l equity(%) of

total equity

Large-cap(%) of

total equity

Small/Mid-cap(%) of

total equity



-1.97

1.22

-0.72

1.68 1.59

-3

-2

-1

0

1

2

3

4

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

• BlackRock’s relative underperformance was driven by a more aggressive glide path that contained a higher weight in

both equities and REITs and a lower weight in investment grade fixed income.

• Fidelity’s relative performance was aided by a greater U.S. exposure within the equity sub-asset allocation and a

strategic long Treasury tilt within the fixed income sub-asset allocation.

• T. Rowe Price’s relative performance was negatively impacted by active decisions within the equity sub-asset allocation

driven primarily by value and small cap tilts.

• State Street’s relative outperformance was primarily driven by a strategic allocation to long Treasuries within the fixed

income sub-asset allocation.

• American Funds’ relative performance benefitted from active decisions within the equity sub-asset allocation that

favored U.S. and large-cap securities.

12-month return attribution


Source: Morningstar; data as of March 31, 2020.

Un

de

rpe

rfo

rma

nce

rela

tive

to

Va

ng

ua

rd

(bp

s)

Ou

tpe

rfo

rma

nce

rela

tive

to V

an

gu

ard

(bp

s)

n U.S. equity n Foreign equity Total relative return

n U.S. fixed income n Foreign fixed income

Relative to top five industry 2050 funds

BlackRock 2050 Fidelity 2050 T. Rowe Price 2050 State Street 2050 American Funds 2050

Element Description

Equity allocation (EA) Vintage allocation to asset classes, and sub-asset allocation to U.S. vs. non-U.S.

Fixed income allocation (FIA)

Equity manager selection (EMS) Benchmark construction differences (cap and/or style tilts), securities lending, fair-value pricing,

building block expense ratiosFixed income manager selection (FIMS)

Other Compounding effect (residual) due to non-daily holdings availability

Total excess return The sum of the above relative performance differences between Vanguard’s TRF and competitors’

similar vintage



-0.77

2.92

-4.01

-2.12-1.77

-5

-4

-3

-2

-1

0

1

2

3

4

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

EA

FIA

EM

S

FIM

S

Oth

er

• BlackRock’s relative underperformance was driven by a more aggressive glide path that contained a higher weight in

equities and a lower weight in investment grade fixed income.

• Fidelity’s more conservative glide path, which includes a large cash equivalents allocation, aided relative performance.

• T. Rowe Price’s relative underperformance was driven by a more aggressive glide path, coupled with negative active

management decisions within the fixed income sub-asset allocation.

• State Street’s relative performance was negatively impacted by a higher equity allocation and tilt towards high-yield within

the fixed income sub-asset allocation.

• American Funds’ relative performance was negatively impacted by active decisions within both the equity and fixed

income sub-asset allocations, though these impacts were partially offset by a greater exposure to U.S. equities.

12-month return attribution (continued)

Un

de

rpe

rfo

rma

nce

rela

tive

to

Va

ng

ua

rd

(bp

s)

Ou

tpe

rfo

rma

nce

rela

tive

to V

an

gu

ard

(bp

s)

Relative to top five industry income funds

BlackRock Income Fidelity Income T. Rowe Price Income State Street Income American Funds Income


2005 Fund is used as a proxy for T. Rowe Price; 2010 for American Funds, as they have no terminal fund.Sources: Morningstar and Vanguard calculations; data as of March 31, 2020.

n U.S. equity n Foreign equity Total relative return

n U.S. fixed income n Foreign fixed income

Element Description

Equity allocation (EA) Vintage allocation to asset classes, and sub-asset allocation to U.S. vs. non-U.S.

Fixed income allocation (FIA)

Equity manager selection (EMS) Benchmark construction differences (cap and/or style tilts), securities lending, fair-value pricing,

building block expense ratiosFixed income manager selection (FIMS)

Other Compounding effect (residual) due to non-daily holdings availability

Total excess return The sum of the above relative performance differences between Vanguard’s TRF and competitors’

similar vintage


A P P E N D I X

Q1


Since

inception

Inception

date

Fund

Vanguard Target Retirement Income Fund -5.91 0.91 3.38 3.17 4.92 4.90 10/27/2003

Target Retirement Income Composite Index -5.56 1.43 3.67 3.41 5.10 — —

Lipper Target Consrv Funds Average -8.15 -1.96 2.16 2.25 3.89 — —

Fidelity Freedom Income -4.72 1.05 2.99 2.91 3.83 4.58 10/17/1996

Fidelity Freedom Index Income Investor -2.08 3.83 3.98 3.20 3.59 3.77 10/2/2009

T. Rowe Price Retirement 2005 -10.36 -3.20 2.21 2.86 5.03 5.04 2/27/2004

American Funds 2010 Trgt Date Retire R5 -7.73 -0.92 3.05 3.53 5.89 4.37 2/1/2007

BlackRock LifePath Index Retire K -7.59 0.19 3.54 3.42 — 4.64 5/31/2011

State Street Target Retirement K -7.80 -1.21 2.77 2.80 — 3.01 9/30/2014

JPMorgan SmartRetirement Income R5 -9.43 -2.84 2.08 2.28 4.58 4.45 5/15/2006

TIAA-CREF Lifecycle Retire Income Instl -9.67 -2.51 2.69 3.09 5.37 4.26 11/30/2007

Principal LifeTime Strategic Inc Instl -5.72 0.61 2.98 2.67 4.57 4.23 3/1/2001

Wells Fargo Target Today R6 -6.87 -0.19 2.52 2.07 3.21 3.73 6/30/2004

Vanguard Target Retirement 2015 Fund -7.44 -0.22 3.61 3.55 6.03 5.66 10/27/2003

Target Retirement 2015 Composite Index -7.04 0.42 3.93 3.83 6.21 — —

Lipper Target 2015 Funds Average -9.92 -2.86 2.38 2.66 4.65 — —

Fidelity Freedom 2015 -10.48 -2.80 2.91 3.43 5.49 5.23 11/6/2003

Fidelity Freedom Index 2015 Investor -8.08 -0.17 4.02 3.88 5.47 5.95 10/2/2009



TIAA-CREF Lifecycle 2015 Institutional -10.77 -3.27 2.79 3.30 6.01 4.59 1/17/2007

Principal LifeTime 2015 Institutional -9.54 -2.06 3.00 2.99 5.75 4.35 2/29/2008

Wells Fargo Target 2015 R6 -8.21 -1.38 2.60 2.34 3.98 3.29 6/29/2007


Target Retirement 2020 Composite Index -10.27 -1.97 3.65 3.88 6.67 — —






State Street Target Retirement 2020 K -10.89 -3.16 3.09 3.33 — 3.74 9/30/2014

JPMorgan SmartRetirement 2020 R5 -10.06 -2.99 2.63 2.83 6.07 5.16 5/15/2006




Average annualized return as of March 31, 2020

Appendix: Absolute performance results

The performance data shown represent past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so investors’ shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance. Some funds assess purchase, redemption, and/or account maintenance fees. The performance data shown do not reflect deduction of these fees. If they did, performance would be lower. Details on these fees and adjusted performance figures can be found in the fund detail section.

Data from Vanguard and Morningstar.

20

A P P E N D I X






Q1


Since

inception

Inception

date

Fund










BlackRock LifePath Index 2025 K -11.26 -2.82 3.38 3.63 — 5.29 5/31/2011































A P P E N D I X





Q1


Since

inception

Inception

date

Fund








































22

A P P E N D I X

22 For institutional and sophisticated investors only. Not for public distribution.



Data from Vanguard and Morningstar.Note: Target 2065 funds were not included in the above table due to limited performance history.


Q1


Since

inception

Inception

date

Fund

Vanguard Target Retirement 2055 Fund -19.89 -10.21 1.78 3.19 — 7.88 8/18/2010

Target Retirement 2055 Composite Index -19.47 -9.51 2.19 3.57 — — —

Lipper Target 2055+ Funds Average -20.39 -11.15 1.25 2.66 6.31 — —

Fidelity Freedom 2055 -20.77 -10.85 1.26 3.04 — 5.55 6/1/2011

Fidelity Freedom Index 2055 Investor -19.14 -8.94 2.50 3.72 — 5.85 6/1/2011



JPMorgan SmartRetirement 2055 R5 -21.33 -11.93 0.67 1.99 — 6.61 1/31/2012

TIAA-CREF Lifecycle 2055 Institutional -21.14 -11.60 1.46 3.17 — 5.87 4/29/2011




Wells Fargo Target 2055 R6 -21.51 -13.10 0.15 2.02 — 5.14 7/1/2011

Vanguard Target Retirement 2060 Fund -19.86 -10.18 1.79 3.20 — 7.19 1/19/2012

Target Retirement 2060 Composite Index -19.47 -9.51 2.19 3.57 — — —


Fidelity Freedom 2060 -20.72 -10.80 1.30 3.04 — 3.79 8/5/2014

Fidelity Freedom Index 2060 Investor -19.20 -8.95 2.51 3.72 — 4.16 8/5/2014

T. Rowe Price Retirement 2060 -20.39 -11.05 1.81 3.30 — 3.52 6/23/2014

American Funds 2060 Trgt Date Retire R5 -17.61 -7.60 3.74 4.84 — 4.84 3/27/2015

JPMorgan SmartRetirement 2060 R5 -21.34 -12.01 0.64 — — 2.77 8/31/2016

TIAA-CREF Lifecycle 2060 Institutional -21.32 -11.72 1.44 3.19 — 3.80 9/26/2014

BlackRock LifePath Index 2060 K -22.07 -12.34 1.44 — — 6.22 2/29/2016


Principal LifeTime 2060 Institutional -21.80 -11.85 1.52 2.52 — 5.66 3/1/2013

Wells Fargo Target 2060 R6 -21.47 -13.12 0.13 — — 2.29 6/30/2015

Vanguard Target Retirement 2065 Fund -19.92 -10.23 — — — 0.27 7/12/2017

Target Retirement 2065 Composite Index -19.47 -9.51 1.70 — — — —


Fidelity Freedom®

2065 -20.74 — — — — -13.60 6/28/2019

Fidelity Freedom®

Index 2065 Investor -19.17 — — — — -12.24 6/28/2019

Principal LifeTime 2065 Institutional -21.97 -12.09 — — — -1.15 9/6/2017


Notes


Important information

For more information, visit institutional.vanguard.com for Vanguard funds and for non-Vanguard funds offered through Vanguard

Brokerage Services®, to obtain a prospectus, or if available, a summary prospectus. Visit our website, or contact your broker to obtain a

prospectus for Vanguard ETF® Shares. Investment objectives, risks, charges, expenses, and other important information are contained in

the prospectus; read and consider it carefully before investing.

All investing is subject to risk, including the possible loss of the money you invest.

Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the

target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive

investments to more conservative ones based on its target date. An investment in the target-date fund is not guaranteed at any time, including on or

after the target date.

Investments in bonds are subject to interest rate, credit, and inflation risk. Investments in stocks or bonds issued by non-U.S. companies are subject

to risks including country/regional risk and currency risk. Foreign investing involves additional risks, including currency fluctuations and political

uncertainty. Bonds of companies in emerging markets are generally more risky than bonds of companies in developed countries.

U.S. government backing of Treasury or agency securities applies only to the underlying securities and does not prevent share-price fluctuations.

Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest.

Diversification does not ensure a profit or protect against a loss in a declining market.

Vanguard Target Retirement Trusts are not mutual funds. They are collective trusts available only to tax-qualified plans and their eligible participants.

Investment objectives, risks, charges, expenses, and other important information should be considered carefully before investing. The collective trust

mandates are managed by Vanguard Fiduciary Trust Company, a subsidiary of The Vanguard Group, Inc.

The Prime Money Market Fund is only available to retail investors (natural persons). You could lose money by investing in the fund. Although the fund

seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon the sale of your

shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or

other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial

support to the fund at any time.

Morningstar data © 2020 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content

providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content

providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. All

investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.

All rights in the FTSE Global All Cap ex U.S. Index (the “Index”) vest in FTSE International Limited (“FTSE”). “FTSE®” is a trademark of London Stock

Exchange Group companies and is used by FTSE under license. The Vanguard Fund(s) (the “Product”) has been developed solely by Vanguard. The

Index is calculated by FTSE or its agent. FTSE and its licensors are not connected to and do not sponsor, advise, recommend, endorse or promote

the Product and do not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b)

investment in or operation of the Product. FTSE makes no claim, prediction, warranty or representation either as to the results to be obtained from the

Product or the suitability of the Index for the purpose to which it is being put by Vanguard.

The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such

funds or securities. The prospectus or the Statement of Additional Information contains a more detailed description of the limited relationship MSCI

has with Vanguard and any related funds.

The Dow Jones UBS Commodity IndexSM is a product of Dow Jones Indexes, a licensed trademark of CME Group Index Services LLC (“CME"), and

has been licensed for use. "Dow Jones®, Dow Jones UBS Commodity IndexSM and "Dow Jones Indexes" are service marks of Dow Jones Trademark

Holdings, LLC ("Dow Jones”) [have been licensed to CME] and have been [sub]licensed for use for certain purposes by The Vanguard Group, Inc.

The Vanguard Group Inc.'s Vanguard Fund(s) based on the Dow Jones UBS Commodity IndexSM are not sponsored, endorsed, sold or promoted by

Dow Jones, CME or their respective affiliates and Dow Jones, CME and their respective affiliates make no representation regarding the advisability of

investing in such product(s).

BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. BARCLAYS® is a trademark and service mark of Barclays Bank Plc,

used under license. Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited ("BISL") (collectively, "Bloomberg"), or

Bloomberg's licensors own all proprietary rights in the Bloomberg Barclays Indices.

Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in

the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide

you with a given level of income.

Past performance is not a guarantee of future returns.


The products are not sponsored, endorsed, issued, sold or promoted by “Bloomberg or Barclays”. Bloomberg and Barclays make no representation

or warranty, express or implied, to the owners or purchasers of the products or any member of the public regarding the advisability of investing in

securities generally or in the products particularly or the ability of the Bloomberg Barclays Indices to track general bond market performance. Neither

Bloomberg nor Barclays has passed on the legality or suitability of the products with respect to any person or entity. Bloomberg’s only relationship to

Vanguard and the products are the licensing of the Bloomberg Barclays Indices which are determined, composed and calculated by BISL without

regard to Vanguard or the products or any owners or purchasers of the products. Bloomberg has no obligation to take the needs of the products or

the owners of the products into consideration in determining, composing or calculating the Bloomberg Barclays Indices. Neither Bloomberg nor

Barclays is responsible for and has not participated in the determination of the timing of, prices at, or quantities of the products to be issued. Neither

Bloomberg nor Barclays has any obligation or liability in connection with the administration, marketing or trading of the products.

Target Income Composite Index: An index derived by applying the fund’s target asset allocation to the results of the following benchmarks: for

international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2,

2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23,

2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global

All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009, and the

Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter, as well as the Bloomberg Barclays U.S. Treasury Inflation Protected Securities

Index through June 2, 2013, and the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index thereafter; for short-term

reserves, the Citigroup Three-Month Treasury Bill Index through June 2, 2013; for international bonds, the Bloomberg Barclays Global Aggregate ex-

USD Float Adjusted RIC Capped Index; and for U.S. stocks, the Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones

Wilshire 5000 Index) through April 22, 2005, the MSCI U.S. Broad Market Index through June 2, 2013, and the CRSP U.S. Total Market Index

thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2015 Composite Index: An index derived by applying the fund’s target asset allocation to the results of the following benchmarks: for


2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through August 23,

2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global

All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009, and the

Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter, as well as the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities

Index through June 2, 2013, and the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index thereafter; for

international bonds, the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index; and for U.S. stocks, the Dow Jones U.S.

Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) through April 22, 2005, the MSCI U.S. Broad Market Index through

June 2, 2013, and the CRSP U.S. Total Market Index thereafter.

Target 2020, 2030, 2040, and 2050 Composite Indexes: Indexes derived by applying the fund’s target asset allocation to the results of the following

benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index

through June 2, 2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through

August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the

FTSE Global All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009, and

the Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter; for international bonds, the Bloomberg Barclays Global Aggregate ex-USD

Float Adjusted RIC Capped Index; and for U.S. stocks, the MSCI U.S. Broad Market Index through June 2, 2013, and the CRSP U.S. Total Market

Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2025, 2035, and 2045 Composite Indexes: Indexes derived by applying the fund’s target asset allocation to the results of the following

benchmarks: for international stocks of developed markets, the MSCI EAFE Index through December 15, 2010, the MSCI ACWI ex USA IMI Index

through June 2, 2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the Select Emerging Markets Index through

August 23, 2006, the MSCI Emerging Markets Index through December 15, 2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the

FTSE Global All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Bond Index through December 31, 2009, and

the Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter; for international bonds, the Bloomberg Barclays Global Aggregate ex-USD

Float Adjusted RIC Capped Index; and for U.S. stocks, the Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire

5000 Index) through April 22, 2005, the MSCI U.S. Broad Market Index through June 2, 2013, and the CRSP U.S. Total Market Index thereafter.

International stock benchmark returns are adjusted for withholding taxes.



2013, and the FTSE Global All Cap ex U.S. Index thereafter; for emerging-market stocks, the MSCI Emerging Markets Index through December 15,

2010, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex U.S. Index thereafter; for U.S. bonds, the Bloomberg

Barclays U.S. Aggregate Float Adjusted Index; for international bonds, the Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC

Capped Index beginning June 3, 2013; and for U.S. stocks, the MSCI U.S. Broad Market Index through June 2, 2013, and the CRSP U.S. Total

Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.




international stocks of developed markets, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex U.S. Index

thereafter; for emerging market stocks, the MSCI ACWI ex USA IMI Index through June 2, 2013, and the FTSE Global All Cap ex U.S. Index

thereafter; for U.S. bonds, the Bloomberg Barclays U.S. Aggregate Float Adjusted Index; for international bonds, the Bloomberg Barclays Global

Aggregate ex-USD Float Adjusted RIC Capped Index beginning June 3, 2013; and for U.S. stocks, the MSCI U.S. Broad Market Index through June

2, 2013, and the CRSP U.S. Total Market Index thereafter. International stock benchmark returns are adjusted for withholding taxes.

Target 2065 Composite Index: An index derived by applying the fund’s target asset allocation to the results of the following benchmarks: the FTSE

Global All Cap ex U.S. Index for international stocks, the Bloomberg Barclays U.S. Aggregate Float Adjusted Index for U.S. bonds, the Bloomberg

Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index for international bonds, and the CRSP U.S. Total Market Index for U.S. stocks.

International stock benchmark returns are adjusted for withholding taxes.

The Morningstar Analyst Rating for Target-Date Series mutual funds is not a credit or risk rating. In February 2013, February 2014, April 2015, April

2016, April 2017, May 2018, and May 2019, Vanguard received the highest rating in the series for 2012, 2013, 2014, 2015, 2016, 2017, and 2018,

respectively. The Morningstar Analyst Rating for Target-Date Series mutual funds reflects a subjective evaluation of quantitative and qualitative

factors performed by mutual fund analysts of Morningstar Inc. and represents a summary expression of forward-looking analysis of target-date mutual

funds. The Morningstar Analyst Rating is assigned on a five-tier scale running from Gold, Silver, Bronze, Neutral, and Negative. Funds are evaluated

on five key pillars: process, price, performance, people, and parent. A Gold rating means that the series has distinguished itself across all five pillars.

It expresses an expectation that the funds, in a series as a whole, collectively will outperform their relevant performance benchmarks and/or peer

groups within the context of the level of risk taken over the long term. The Silver rating applies to funds with notable advantages across several, but

perhaps not all, of the five pillars—strengths that give the analysts a high level of conviction. A Bronze rating applies to funds with advantages that

outweigh the disadvantages across the five pillars and with sufficient level of analyst conviction to warrant a positive rating. A Neutral rating is for

funds that aren't likely to deliver standout returns but also aren't likely to significantly underperform, according to the analysts, and a Negative rating is

reserved for funds that have at least one flaw likely to significantly hamper future performance and that are considered by analysts an inferior offering

to their peers. For additional information about the Morningstar Analyst Rating for Target-Date Series mutual funds, including its methodology, visit

morningstar.com/company.

The Morningstar Analyst Rating for Target-Date Series mutual funds should not be used as the sole basis in evaluating a target-date mutual fund

series. This Morningstar Analyst Rating is based on Morningstar’s current expectations about future events; therefore, in no way should the rating be

considered as a guarantee of favorable performance. All Morningstar Analyst Ratings involve unknown risks and uncertainties, which may cause

Morningstar’s expectations not to occur or to differ significantly from what was expected.

The Morningstar Analyst Rating for the Target-Date Series is distinct from the Analyst Rating for individual mutual funds and mutual fund families. A

fund in a target-date series may have analyst ratings for both its series and a particular fund, and in some cases those ratings may not be identical.

While target-date series funds are typically evaluated by Morningstar once a year, there is no set time frame for their evaluation. For additional

information about the Morningstar Analyst Rating for Target-Date Series mutual funds, including its methodology, visit corporate.morningstar.com.


28CFA® is a registered trademark owned by CFA Institute.

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© 2020 The Vanguard Group, Inc.

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Andrey Kotlyarenko, CFA

Brian M. Miller, CFA

Anthony F. Tedesco

Investment Strategy Group

Jean A. Young, CPA

Andrea S. Brooks

Sean Kim

Laurie A. Kinkaid

Susan Levine

Tonya J. Meyrick

Melissa A. Petrillo

Sara Sandstrom

TRFQR 052020

1001941 Expiration date: 5/5/2021



For institutional and sophisticated investors only. Not for public distribution.

VIGM, S.A. de C.V. Asesor en Inversiones Independiente (“Vanguard Mexico”) registration number: 30119-001-(14831)-19/09/2018. The registration of Vanguard Mexico before the Comisión Nacional Bancaria y de Valores (“CNBV”) as an Asesor en Inversiones Independiente is not a certification of Vanguard Mexico’s compliance with regulation applicable to Advisory Investment Services (Servicios de Inversión Asesorados) nor a certification on the accuracy of the information provided herein. The supervision scope of the CNBV is limited to Advisory Investment Services only and not all services provided by Vanguard Mexico.

This material is solely for informational purposes and does not constitute an offer or solicitation to sell or a solicitation of an offer to buy any security, nor shall any such securities be offered or sold to any person, in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. Reliance upon information in this material is at the sole discretion of the reader.

Securities information provided in this document must be reviewed together with the offering information of each of the securities which may be found on Vanguard’s website: https://www.vanguardmexico.com/web/cf/mexicoinstitutional/en/home or www.vanguard.com

Vanguard Mexico may recommend products of The Vanguard Group Inc. and its affiliates and such affiliates and their clients may maintain positions in the securities recommended by Vanguard Mexico.

ETF Shares can be bought and sold only through a broker and cannot be redeemed with the issuing fund other than in very large aggregations. Investing in ETFs entails stockbroker commission and a bid-offer spread which should be considered fully before investing. The market price of ETF Shares may be more or less than net asset value.

All investments are subject to risk, including the possible loss of the money you invest. Investments in bond funds are subject to interest rate, credit, and inflation risk. Governmental backing of securities apply only to the underlying securities and does not prevent share-price fluctuations. High-yield bonds generally have medium- and lower-range credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings.

There is no guarantee that any forecasts made will come to pass. Past performance is no guarantee of future results.

Prices of mid- and small-cap stocks often fluctuate more than those of large-company stocks. Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility. Stocks of companies are subject to national and regional political and economic risks and to the risk of currency fluctuations, these risks are especially high in emerging markets. Changes in exchange rates may have an adverse effect on the value, price or income of a fund.

The information contained in this material derived from third-party sources is deemed reliable, however Vanguard Mexico and The Vanguard Group Inc. are not responsible and do not guarantee the completeness or accuracy of such information.

This document should not be considered as an investment recommendation, a recommendation can only be provided by Vanguard Mexico upon completion of the relevant profiling and legal processes.

This document is for educational purposes only and does not take into consideration your background and specific circumstances nor any other investment profiling circumstances that could be material for taking an investment decision. We recommend to obtain professional advice based on your individual circumstances before taking an investment decision.

This document is not intended to provide tax advice or make and exhaustive analysis of the tax regime of the securities described herein. We strongly recommend to obtain professional tax advice from a tax specialist.

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