Vanguard Reaches Proposed Settlement in Target-Date Sell-Off Case

Vanguard Group has reached a proposed settlement with investors who alleged in a lawsuit  that the giant asset manager caused a costly “elephant stampede” sell-off from its retail target-date funds when it opened institutional funds to more retirement plans.

Vanguard’s move and the resulting sell-off surprised individual customers in taxable accounts with massive capital gains tax bills, according to the lawsuit filed in U.S. District Court for the Eastern District of Pennsylvania in 2022.

Plaintiffs and defendants notified the court Friday that they have reached a settlement in principle to resolve all claims after a successful mediation. The parties said they need time to negotiate the settlement details.

U.S. District Judge John F. Murphy on Monday ordered all outstanding deadlines in the case stayed pending the parties’ formal agreement to, and court approval of, the proposed settlement.

He also canceled an Oct. 22 hearing on the plaintiffs’ motion to certify a class in the lawsuit. The parties told the court that they plan to seek preliminary approval of the proposed class settlement by Nov. 4.