NEW YORK (CNNfn) - Vanguard Group is closing for new investors its well-regarded, $9.8 billion Vanguard Health Care Fund for at least six months to discourage "speculative investing," the mutual fund giant said Thursday.
Investors poured $564 million to the fund in January alone, raising concerns about Wall Street players who chase "hot" performers, said Vanguard Chairman John J. Brennan.
Brennan said speculative investors are likely to dump their shares when a fund's performance cools off -- which could drive up operating costs, deliver unwanted capital gains and disrupt investment operations.
"We are taking these steps to protect the fund's long-term shareholders," Brennan said in a letter to investors.
The January inflows are twice the level of November's, and four times the level of January 1998, he said.
The fund earned 40.80 percent in 1998, beating the S&P 500 by 12.22 percent, according to Morningstar, a Chicago fund-tracker. The fund is ranked five out of five stars for risk-adjusted returns by Morningstar.
As of Feb. 24, the fund was down 1.50 percent year-to-date, which lags the S&P benchmark by 3.80 percent, Morningstar said. Its top holdings are Pharmacia & Upjohn (PNU), Warner-Lambert (WLA) and Bristol-Myers Squibb (BMY), Morningstar said.
The fund is closing as of Thursday. Vanguard doesn't think the fund will remain closed for more than a year, but it has no plans to reopen for at least six months.
Vanguard is also launching a new redemption fee policy as of April 19. Investors who sell their shares within less than five years will pay a 1 percent fee, the company said.
Vanguard, based in Wayne, Pa., has closed four other mutual funds to new investors. Most recently, it shut Vanguard Primecap Fund in April 1998.