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The Vanguard Group

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For the anarchist political group, see Vanguard Group (anarchist).

The Vanguard Group, Inc. is an American registered investment advisor founded on May 1, 1975, and based in Malvern, Pennsylvania, with about $9.3 trillion in global assets under management as of May 2024.[3] It is the largest provider of mutual funds and the second-largest provider of exchange-traded funds (ETFs) in the world after BlackRock's iShares.[4] In addition to mutual funds and ETFs, Vanguard offers brokerage services, educational account services, financial planning, asset management, and trust services. Several mutual funds managed by Vanguard are ranked at the top of the list of US mutual funds by assets under management.[5] Along with BlackRock and State Street, Vanguard is considered to be one of the Big Three index fund managers that play a dominant role in corporate America.[6][7]

The Vanguard Group, Inc.
Company typePrivate[1]
IndustryInvestment management
FoundedMay 1, 1975; 49 years ago (1975-05-01)
FounderJohn C. Bogle
HeadquartersMalvern, Pennsylvania, U.S.
Key people
Products
RevenueUS$6.93 billion (as of 2022)[needs update]
AUMIncrease US$9.3 trillion (as of September 30, 2024)[2]
Number of employees
Increase 20,000 (as of December 31, 2023)[2]
Websiteinvestor.vanguard.com Edit this at Wikidata

Founder and former chairman John C. Bogle is credited with the creation of the first index fund available to individual investors and was a proponent and major enabler of low-cost investing by individuals,[8][9] though Rex Sinquefield has also been credited with the first index fund open to the public a few years before Bogle.[10]

Vanguard is owned by the funds managed by the company and is therefore owned by its customers.[11] Vanguard offers two classes of most of its funds: investor shares and admiral shares. Admiral shares have slightly lower expense ratios but require a higher minimum investment, often between $3,000 and $100,000 per fund.[12] Vanguard's corporate headquarters is in Malvern, a suburb of Philadelphia. It has satellite offices in Charlotte, North Carolina, Dallas, Texas, Washington D.C., and Scottsdale, Arizona, as well as Canada, Australia, Asia, and Europe.

History

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Formation

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Picture of John C. Bogle late in his career

In 1951, for his undergraduate thesis at Princeton University, John C. Bogle conducted a study in which he found that most mutual funds did not earn more money compared to broad stock market indexes.[13] Even if the stocks in the funds beat the benchmark index, management fees reduced the returns to investors below the returns of the benchmark.[14]

Immediately after graduating from Princeton University in 1951, Bogle was hired by Wellington Management Company.[15] In 1966, he forged a merger with a fund management group based in Boston.[15] He became president in 1967 and CEO in 1970.[15] However, the merger ended badly and Bogle was therefore fired in 1974.[15] Bogle has said about being fired: "The great thing about that mistake, which was shameful and inexcusable and a reflection of immaturity and confidence beyond what the facts justified, was that I learned a lot. And if I had not been fired then, there would not have been a Vanguard."[16]

Bogle arranged to start a new fund division at Wellington. He named it Vanguard, after Horatio Nelson's flagship at the Battle of the Nile, HMS Vanguard.[17] Bogle chose this name after a dealer in antique prints left him a book about Great Britain's naval achievements that featured HMS Vanguard. Wellington executives initially resisted the name, but narrowly approved it after Bogle mentioned that Vanguard funds would be listed alphabetically next to Wellington Funds.[8]

Growth of company

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The Wellington executives prohibited the fund from engaging in advisory or fund management services. Bogle saw this as an opportunity to start a passive fund tied to the performance of the S&P 500, which was established in 1957.[8][9] Bogle was also inspired by Paul Samuelson, an economist who later won the Nobel Memorial Prize in Economic Sciences, who wrote in an August 1976 column in Newsweek that retail investors needed an opportunity to invest in stock market indexes such as the S&P 500.[18][19]

In 1976, after getting approval from the board of directors of Wellington, Bogle established the First Index Investment Trust (now called the Vanguard 500 Index Fund).[20] This was one of the earliest passive investing index funds, preceded a few years earlier by a handful of others (e.g., Jeremy Grantham's Batterymarch Financial Management in Boston, and index funds managed by Rex Sinquefield at American National Bank in Chicago, and John "Mac" McQuown at Wells Fargo's San Francisco office).[21][10]

Bogle's S&P 500 index raised $11 million in its initial public offering, compared to expectations of raising $150 million.[22] The banks that managed the public offering suggested that Bogle cancel the fund due to the weak reception, but Bogle refused.[8][9] At this time, Vanguard had only three employees: Bogle and two analysts. Asset growth in the first years was slow, partially because the fund did not pay commissions to brokers who sold it, which was unusual at the time. Within a year, the fund had only grown to $17 million in assets, but one of the Wellington Funds that Vanguard was administering had to be merged in with another fund, and Bogle convinced Wellington to merge it in with the Index fund.[8][9] This brought assets up to almost $100 million.

Growth in assets accelerated after the beginning of a bull market in 1982, and the indexing model became more popular at other companies. These copy funds were not successful since they typically charged higher fees, which defeated the purpose of index funds. In November 1984, Vanguard launched the Vanguard Primecap fund in collaboration with Primecap.[23] In December 1986, Vanguard launched its second mutual fund, a bond index fund called the Total Bond Fund, which was the first bond index fund ever offered to individual investors.[24] One earlier criticism of the first Index fund was that it was only an index of the S&P 500.[8][9] In December 1987, Vanguard launched its third fund, the Vanguard Extended Market Index Fund, an index fund of the entire stock market, excluding the S&P 500.[25] Over the next five years, other funds were launched, including a small-cap index fund, an international stock index fund, and a total stock market index fund. During the 1990s, more funds were offered, and several Vanguard funds, including the S&P 500 index fund and the total stock market fund, became among the largest funds in the world, and Vanguard became the largest mutual fund company in the world.[26] Noted investor John Neff retired as manager of Vanguard's Windsor Fund in 1995, after a 30-year career in which his fund beat returns of the S&P 500 index by an average of 300 basis points (3%) per year.[27]

Environmental impacts

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In March 2021, Vanguard joined over 70 asset managers, aiming to have companies within their portfolios to achieve net-zero emissions by 2060, a goal that parallels the Paris Agreement.[28] Climate and Indigenous advocates felt optimistic about this development, but stressed the issue that Vanguard must also stop investing in companies that engage in deforestation, fossil fuel extraction, and environmental degradation. In line with their sustainability efforts, Vanguard has put out a number of statements aimed at tackling climate change within their portfolios and the world at large. Despite these statements, the company still continues to have companies within their investor portfolios, such as ENAP Sipetrol, CPNC, and Petroamazonas,[29] all of which contribute to fossil fuel production and the furtherance of climate change. When it comes to the issue of Indigenous rights, Vanguard has released a statement titled "Social Risks and Right of Indigenous Peoples"[30] which lists a series of questions for companies on the topic. However Vanguard frames these questions in the aims of protecting Indigenous culture without any concrete policy to safeguard Indigenous rights and ensure that the internationally recognized right of Free, Prior, and Informed Consent is present in discussions with Indigenous communities.[citation needed]

In terms of financial involvement, today, Vanguard holds at least $86 billion in coal,[31] making them the world's number-one investor in the industry. Additionally, according to Amazon Watch, the company holds $2.6 billion in debt and $9.6 billion in equities[29] for oil companies currently working within the Amazon rainforest.

Recent

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Bogle retired from Vanguard as chairman in 1999 when he reached the company's mandatory retirement age of 70 and he was succeeded by John J. ("Jack") Brennan.[32] In February 2008, F. William McNabb III became President[33] and in August 2008, he became CEO.[34] Both of Bogle's successors expanded Vanguard's offerings beyond the index mutual funds that Bogle preferred, in particular into exchange traded funds (ETFs) and actively managed funds.[35] Some of Vanguard's actively-managed funds predate Bogle's retirement however (their healthcare stock fund began in 1984).[36] Bogle had been skeptical of ETFs as they trade mid-day like single stocks while mutual funds trade on a single price at day's end. He believed buy and hold investors could make good use of ETFs tracking broad indices, but thought ETFs had potentially higher fees due to the bid ask spread, could be too narrowly specialized, and worried anything that could be traded mid-day would be traded mid-day, potentially reducing investor returns.[37]

In May 2017 Vanguard launched a fund platform in the United Kingdom.[38]

In July 2017, it was announced that McNabb would be replaced as chief executive officer by chief investment officer Mortimer J. Buckley, effective January 1, 2018.[39] McNabb remains at the company as chairman.[40]

In 2020, Vanguard rolled out a digital adviser and began building up an investment team in China.[41] In October 2020, Vanguard returned about $21 billion in managed assets to government clients in China due to concerns about legal compliance, staffing and profitability.[42] In response to its China investments, the Financial Times reported that the nonprofit group Coalition for a Prosperous America criticized Vanguard for "acting as a pipeline through which US investment dollars are being funneled into Chinese military companies and corporations sanctioned over human rights abuses."[43]

In February 2021, Vanguard launched its fractional share program of its exchange-traded funds, or ETFs, where investors can invest for as little as $1. Fractional share ownership is a derivative of micro-investing, a type of investment strategy that is designed to make investing regular, accessible and affordable, especially for those who may not have a lot of money to invest or who are new to investing.[44][45]

The Vanguard Group has been the subject of conspiracy theories, including the conspiracy theory that the Vanguard Group is part of a plot that orchestrated the COVID-19 pandemic. Some Vanguard Group conspiracy theories have also incorporated antisemitism, such as a conspiracy theory falsely claiming that Vanguard Group CEO Mortimer J. Buckley, who is of Irish Catholic heritage, is Jewish and is part of a Jewish cabal responsible for COVID and a "COVID agenda".[46][47]

In November 2022, Vanguard launched its superannuation fund in Australia under the name Vanguard Super.[48]

On May 14, 2024, Vanguard announced the appointment of Salim Ramji, a veteran from BlackRock Inc., as its next CEO, succeeding Tim Buckley. Ramji, the first outsider to lead Vanguard, assumed his role on July 8, 2024.[49][50]

Ukraine

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Vanguard is one of the top five shareholders in Kernel Holding, an agribusiness that is the largest producer and exporter of grains in Ukraine.[51][52] Vanguard has been donating to humanitarian relief causes in Ukraine as a response to the war and implementing sanctions policies against Russia.[53]

See also

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References

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  1. ^ "The Vanguard Group, Inc.: Private Company Information". Bloomberg. Retrieved December 22, 2019.
  2. ^ a b "Fast Facts About Vanguard". The Vanguard Group, Inc. Retrieved March 5, 2019.
  3. ^ Flood, Chris (January 13, 2021). "Vanguard's assets hit record $7tn". Financial Times. Archived from the original on June 21, 2021. Retrieved June 21, 2021.
  4. ^ "ETF League Tables - ETF.com". Retrieved March 22, 2017.
  5. ^ "Lipper Performance Report" (PDF).
  6. ^ Bebchuk, Lucian; Hirst, Scott (2019). "Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy". Columbia Law Review. 119 (8): 2029–2146. SSRN 3282794.
  7. ^ McLaughlin, David; Massa, Annie (January 9, 2020). "The Hidden Dangers of the Great Index Fund Takeover". Bloomberg Businessweek. Retrieved June 7, 2021.
  8. ^ a b c d e f "Lightning Strikes: The Creation of Vanguard, the First Index Mutual Fund, and the Revolution It Spawned" (PDF). Bogle Financial Markets Research Center. April 1, 1997. Archived from the original (PDF) on June 12, 2018.
  9. ^ a b c d e Sommer, Jeff (August 11, 2012). "A Mutual Fund Master, Too Worried to Rest". The New York Times. Retrieved February 2, 2015.
  10. ^ a b Riley, Naomi Schaefer (October 26, 2012). "The Weekend Interview with Rex Sinquefield: Meet One of the Super-PAC Men". WSJ. Retrieved December 30, 2015.
  11. ^ DiStefano, Joseph N. "Vanguard SEC Filings Drop 'At-Cost,' 'No Profit' Claims That Were Dear to Late Founder John Bogle". The Philadelphia Inquirer. Retrieved October 4, 2019.
  12. ^ "Admiral Shares Help Keep Your Costs Under Control". Vanguard. April 9, 2020.
  13. ^ Armbruster, Mark (October 14, 2016). "Comparing index mutual funds and active managers" (PDF). Rochester Business Journal.
  14. ^ MacBride, Elizabeth (October 14, 2015). "Jack Bogle: Follow these 4 investing rules—ignore the rest". CNBC.
  15. ^ a b c d Ferri, Rick (February 10, 2014). "What Was John Bogle Thinking?". Forbes Magazine.
  16. ^ Boyle, Matthew (December 17, 2007). "Be prepared for a lot of bumps". Fortune Magazine.
  17. ^ Reklaitis, Victor (December 22, 2014). "5 things you don't know about Vanguard". MarketWatch.
  18. ^ Mihm, Stephen (September 6, 2016). "How Index Funds Prevailed". Bloomberg L.P.
  19. ^ Baldwin, William (January 21, 2015). "Is Vanguard Too Successful?". Forbes Magazine.
  20. ^ Culloton, Dan (August 9, 2011). "A Brief History of Indexing". Morningstar.
  21. ^ Fox, Justin (2011). The myth of the rational market : a history of risk, reward, and delusion on Wall Street (1st ed.). New York: Harper Business. ISBN 978-0-06-059903-4. OCLC 753745023.
  22. ^ Bogle, John; Rafalaf, Andrew (October 1, 2002). "A Wall Street Revolution". Fortune Magazine. CNN.
  23. ^ Norton, Leslie P. "Primecap in the Spotlight". www.barrons.com. Retrieved August 19, 2023.
  24. ^ Bogle, John C. (July 5, 2012). The Clash of the Cultures: Investment vs. Speculation. John Wiley & Sons. ISBN 9781118238219.
  25. ^ "Quick Guide to Vanguard Extended Market Index Investor Fund (VEXMX)". Yahoo Finance. Zacks Equity Research. March 4, 2016. Retrieved September 13, 2024.{{cite web}}: CS1 maint: others (link)
  26. ^ Godin, Seth (1997). If You're Clueless about Mutual Funds and Want to Know More. Dearborn Financial Publishing, Inc. p. 98. ISBN 9780793125548.
  27. ^ DiStefano, Joseph (June 5, 2019). "Brilliant stock picker John Neff, who ran Vanguard's Windsor Fund and built Penn's endowment, dies at 87". The Philadelphia Inquirer. Archived from the original on December 13, 2023.
  28. ^ "Investors BlackRock, Vanguard join net zero effort". Reuters. March 29, 2021. Retrieved September 3, 2022.
  29. ^ a b Peterson, Laura (June 2021). "Investing in Amazon Crude II" (PDF).
  30. ^ "Vanguard Investment Stewardship Insights" (PDF). December 2020.
  31. ^ "Groundbreaking Research Reveals the Financiers of the Coal Industry | urgewald e.V." www.urgewald.org. Retrieved September 3, 2022.
  32. ^ Costello, Martine (August 12, 1999). "Vanguard's Bogle retires". CNN.
  33. ^ "McNabb To Succeed Brennan at Vanguard". Forbes Magazine. February 22, 2008.
  34. ^ "Executive Moves". Money Management Executive. December 14, 2009.
  35. ^ "Index funds vs. actively managed funds | Vanguard". investor.vanguard.com. Retrieved May 19, 2020.
  36. ^ "Vanguard Mutual Fund Profile | Vanguard". investor.vanguard.com.
  37. ^ Benz, Christine (2010). "Bogle: Buy and Hold, Don't Trade ETFs". Morningstar.com. Retrieved July 9, 2021.
  38. ^ Ricketts, David. "Hargreaves hit as Vanguard goes direct to man on the street". Retrieved October 4, 2019.
  39. ^ Smith, Peter (July 13, 2017). "Tim Buckley to succeed Bill McNabb as Vanguard chief". Financial Times. Retrieved July 14, 2017.
  40. ^ Moyer, Liz (July 13, 2017). "Vanguard, manager of $4.4 trillion and leader in the index fund business, is getting a new CEO". CNBC. Retrieved January 26, 2018.
  41. ^ Wigglesworth, Robin; Henderson, Richard (January 12, 2020). "Vanguard and the US financial system: too big to be healthy?". Financial Times. Archived from the original on December 11, 2022. Retrieved December 21, 2020.
  42. ^ "Vanguard Returns $21 Billion in Assets to China State Funds". Bloomberg. October 9, 2020. Archived from the original on October 12, 2020. Retrieved October 11, 2020.
  43. ^ Kynge, James; Sevastopulo, Demetri; Lockett, Hudson (October 12, 2023). "Vanguard funds invest in China military groups, report says". Financial Times. Retrieved October 12, 2023.
  44. ^ Lucchetti, Aaron (December 22, 1999). "E-Tailers Allow Buyers to Add Fund Investments to Carts". Wall Street Journal. Archived from the original on April 21, 2023. Retrieved April 20, 2023.
  45. ^ Smith, Lee; Dreyfuss, Joel; Grimes, Brad; Keeney, Jennifer; Pendleton, Jennifer; Solomon, Karen; Spanbauer, Scott; Roberts-Witt, Sarah; Witt, Louise (May 1, 2001). "The Innovators Meet the 65 companies and their owners who have conjured up the latest wave of products, services, and technologies". CNN Money. Retrieved April 20, 2023.
  46. ^ "Fact check: The COVID-19 pandemic was not orchestrated by pharmaceutical companies, investment groups and philanthropists". Reuters. January 30, 2021. Retrieved April 27, 2023.
  47. ^ "'COVID agenda is Jewish': Antisemitic flyer found at Melbourne synagogue". The Jerusalem Post. July 16, 2022. Retrieved April 27, 2023.
  48. ^ "Vanguard looks to shake up Australia's $3.3 trillion super sector with low-fee products". The Sydney Morning Herald. November 11, 2022. Retrieved March 19, 2023.
  49. ^ Brush, Silla (May 14, 2024). "Vanguard Appoints BlackRock Veteran Salim Ramji as Next CEO - BNN Bloomberg". BNN. Bloomberg. Retrieved May 15, 2024.
  50. ^ Godbout, Ted (July 8, 2024). "Ramji Takes the Helm as Vanguard CEO". National Association of Plan Advisors. Retrieved July 12, 2024.
  51. ^ "War and Theft: The Takeover of Ukraine's Agricultural Land". Okland Institute. Retrieved August 20, 2024.
  52. ^ "Kernel". Kernel.ua. Retrieved August 20, 2024.
  53. ^ "Vanguard's Response to the War in Ukraine and Current Events | Vanguard". investor.vanguard.com. Retrieved August 20, 2024.
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