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In 1975, we opened our doors for business for the very first time. One year later, our innovative, progressive mindset enabled us to usher in the era of low-cost index investing. We were disruptive then, and today, we’re keeping it going strong with active oversight and commitment to client choice. Our Investment Management Group is home to members in six functional groups, each fulfilling core responsibilities that are crucial to our success. While some groups manage our funds, others support our worldwide technology and data initiatives, conduct investment research or analyze and monitor investment and operational risk. Together, they ensure our clients feel supported and secure when they invest in us.


The Vanguard Group

American investment management company

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

The Vanguard Group, Inc. is an American registered investment advisor based in Malvern, Pennsylvania with about $7 trillion in global assets under management, as of January 13, 2021.[5] 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.[6] In addition to mutual funds and ETFs, Vanguard offers brokerage services, variable and fixed annuities, 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.[7] Along with BlackRock and State Street, Vanguard is considered one of the Big Three index fund managers that dominate corporate America.[8][9]

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,[10][11] though Rex Sinquefield has also been credited with the first index fund open to the public a few years before Bogle.[12]

Vanguard is owned by the funds managed by the company and is therefore owned by its customers.[13] 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.[14] Vanguard's corporate headquarters is in Malvern, a suburb of Philadelphia. It has satellite offices in Charlotte, North Carolina, and Scottsdale, Arizona. The company also has offices in Canada, Australia, Asia, and Europe.



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.[15] Even if the stocks in the funds beat the benchmark index, management fees reduced the returns to investors below the returns of the benchmark.[16]

Immediately after graduating from Princeton University in 1951, Bogle was hired by Wellington Management Company.[17] In 1966, he forged a merger with a fund management group based in Boston.[17] He became president in 1967 and CEO in 1970.[17] However, the merger ended badly and Bogle was therefore fired in 1974.[17] 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."[18]

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.[19] 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.[10]

Growth of company[edit]

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.[10][11] 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.[20][21]

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).[22] 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" McCown at Wells Fargo's San Francisco office).[23][12]

Bogle's S&P 500 index raised $11 million in its initial public offering, compared to expectations of raising $150 million.[24] The banks that managed the public offering suggested that Bogle cancel the fund due to the weak reception, but Bogle refused.[10][11] 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.[10][11] 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 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.[25] One earlier criticism of the first Index fund was that it was only an index of the S&P 500.[10][11] 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.[26] 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.[27] 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 per year.[28]


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.[29] In February 2008, F. William McNabb III became President[30] and in August 2008, he became CEO.[31] 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.[32] Some of Vanguard's actively-managed funds predate Bogle's retirement however (their healthcare stock fund began in 1984).[33] Bogle had been skeptical of ETF's 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.[34]

In May 2017 Vanguard launched a fund platform in the United Kingdom.[35]

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.[36] McNabb remains at the company as chairman.[37]

In 2020, Vanguard rolled out a digital adviser and began building up an investment team in China.[38] 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.[39]

See also[edit]


  1. ^"The Vanguard Group, Inc.: Private Company Information - Bloomberg". Retrieved December 22, 2019.
  2. ^
  3. ^"The Financial Times". January 12, 2021.
  4. ^"Fast facts about Vanguard". The Vanguard Group, Inc. Retrieved March 5, 2019.
  5. ^Flood, Chris (13 January 2021). "Vanguard's assets hit record $7tn". Financial Times. Archived from the original on 21 June 2021. Retrieved 21 June 2021.
  6. ^"ETF League Tables -". Retrieved 22 March 2017.
  7. ^"Lipper Performance Report"(PDF).
  8. ^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.
  9. ^McLaughlin, David; Massa, Annie (January 9, 2020). "The Hidden Dangers of the Great Index Fund Takeover". Bloomberg Businessweek. Retrieved June 7, 2021.
  10. ^ abcdef"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.
  11. ^ abcdeSommer, Jeff (August 11, 2012). "A Mutual Fund Master, Too Worried to Rest". New York Times. Retrieved February 2, 2015.
  12. ^ abRiley, Naomi Schaefer (October 26, 2012). "The Weekend Interview with Rex Sinquefield: Meet One of the Super-PAC Men". WSJ. Retrieved December 30, 2015.
  13. ^DiStefano, Joseph N. "Vanguard SEC filings drop 'at-cost,' 'no profit' claims that were dear to late founder John Bogle". The Philadelphia Inquirer. Retrieved 2019-10-04.
  14. ^"Admiral Shares help keep your costs under control". Vanguard. April 9, 2020.
  15. ^Armbruster, Mark (October 14, 2016). "Comparing index mutual funds and active managers"(PDF). Rochester Business Journal.
  16. ^MacBride, Elizabeth (October 14, 2015). "Jack Bogle: Follow these 4 investing rules—ignore the rest". CNBC.
  17. ^ abcdFerri, Rick (February 10, 2014). "What Was John Bogle Thinking?". Forbes Magazine.
  18. ^Boyle, Matthew (December 17, 2007). "Be prepared for a lot of bumps". Fortune Magazine.
  19. ^Reklaitis, Victor (December 22, 2014). "5 things you don't know about Vanguard". MarketWatch.
  20. ^Mihm, Stephen (September 6, 2016). "How Index Funds Prevailed". Bloomberg L.P.
  21. ^Baldwin, William (January 21, 2015). "Is Vanguard Too Successful?". Forbes Magazine.
  22. ^Culloton, Dan (August 9, 2011). "A Brief History of Indexing". Morningstar.
  23. ^Justin Fox (2011). The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. HarperBusiness, ISBN 9780060599034
  24. ^Bogle, John; Rafalaf, Andrew (October 1, 2002). "A Wall Street Revolution". Fortune Magazine. CNN.
  25. ^Bogle, John C. (July 5, 2012). The Clash of the Cultures: Investment vs. Speculation. John Wiley & Sons. ISBN .
  26. ^"Quick Guide to Vanguard Extended Market Index Investor Fund". Zacks.
  27. ^Godin, Seth (1997). If You're Clueless about Mutual Funds and Want to Know More. Dearborn Financial Publishing, Inc. p. 98.
  28. ^Loth, Richard. "The Greatest Investors: John Neff". Investopedia.
  29. ^Costello, Martine (August 12, 1999). "Vanguard's Bogle retires". CNN.
  30. ^"McNabb To Succeed Brennan At Vanguard". Forbes Magazine. February 22, 2008.
  31. ^"Executive Moves". Money Management Executive. December 14, 2009.
  32. ^"Index funds vs. actively managed funds | Vanguard". Retrieved 2020-05-19.
  33. ^Vanguard Health Care Fund Investor Shares (VGHCX), accessed 09 July 2021
  34. ^Christine Benz (2010). Bogle: Buy and Hold, Don't Trade ETFs., accessed 09 July 2021
  35. ^Ricketts, David. "Hargreaves hit as Vanguard goes direct to man on the street". Retrieved 2019-10-04.
  36. ^Smith, Peter (July 13, 2017). "Tim Buckley to succeed Bill McNabb as Vanguard chief". Financial Times. Retrieved July 14, 2017.
  37. ^Moyer, Liz (2017-07-13). "Vanguard, manager of $4.4 trillion and leader in the index fund business, is getting a new CEO". CNBC. Retrieved 2018-01-26.
  38. ^Robin Wigglesworth, Richard Henderson (12 January 2020). "Vanguard and the US financial system: too big to be healthy?". Financial Times. Retrieved 21 December 2020.CS1 maint: uses authors parameter (link)
  39. ^Bloomberg News. "Vanguard Returns $21 Billion in Assets to China State Funds". Bloomberg. Archived from the original on 11 October 2020. Retrieved 11 October 2020.

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The wealth management unit of the $8-trillion, Malvern, Pa., manager will exclusively distribute three active, high-conviction mutual funds with fees starting at 40 basis points

Brooke's Note: Much of the investing world is racing to become more like Vanguard Group, where low fees and straightforward dealings reign. Yet the not-half-as-sleepy-as-it-might-look Malvern, Pa. giant is hardly standing still. It continues to shift course to a future upmarket where higher fees, greater complexity and even a heightened potential for conflicts-of-interest come into play. At the crux of that Vanguard effort is the use of its RIA as a means to distribute active fund management. It could make a vanilla mass market RIA--still just 30-basis-points--more exciting by enhancing it with possible alpha returns -- hence attracting more high-net-worth investors. But Vanguard is also pointing out that the combination of wealth manager and investment manager gives it much greater comfort in more aggressively selling active management. Half the problem is making sure the active funds user does so in a responsible manner. Now, though, it is the user through Vanguard's RIA -- albeit with the caveat that the investor will be able to opt out.

The Vanguard Group is making its $243-billion RIA a little more like a stock brokerage, to make it more attractive to high-net-worth clients, a better contributor to fund distribution and potentially much more profitable.

The Malvern, Pa., asset manager announced, Aug. 26, that Vanguard Personal Advisor Services (VPAS) will become the sole vehicle of distribution for three actively managed proprietary funds.

As part of a new active portfolio, it will increase its revenues on underlying assets by as much as 35 basis points.

VPAS currently has virtually all of its nearly $250 billion of RIA assets invested into its own index funds.

In contrast, over the last decade, Vanguard's average ETF expense ratio fell from 0.17% to 0.09%, according to Morningstar Data.

Some industry observers have questioned whether investing VPAS client assets in a riskier active portfolio is in their best interest.

Yet VPAS advisors won't suddenly start pushing clients to opt-in for active management, says Bill Whitt, senior analyst at Boston consultancy, Aite-Novarica, in comments provided to Barron’s.

"This introduction of active management in their VPAS portfolio is being done in a very conservative fashion … They’re just sensing there is some additional demand out there in the marketplace they’re not tapping into," he explains.

Vanguard declined repeated requests to clarify how just how far it is willing to go in reaching for higher equity returns by taking on higher risk other than to say it will do so in accordance with the personal objectives and tolerances of its investors.

Suitability standard

To avoid any perception of self-dealing in guiding investors toward higher fees, Vanguard will require investors to explicitly "opt-in" with their advisor and grant them permission to expose assets to the heightened risk.

Karyn Baldwin

Vanguard also used derivations of the word "suitability" twice in the press release announcing its plan to distribute the funds.

Wall Street brokers have long used a "suitability standard" as the basis for introducing investment opportunities to investors.

The suitability standard is a notch below a fiduciary standard. But -- unlike most RIAs -- brokers get a final sign-off from investors on how they buy assets. See: The suitability standard, defined.

VPAS will also require investors to deposit a minimum of $50,000 to open an account. 

"Within an advised account, VPAS clients will be able to invest in these funds if, in consultation with their advisors, they are deemed suitable and appropriately aligned with risk tolerance and investment objectives," says company spokeswoman, Karyn Baldwin, via email.

Jon Cleborne, head of Vanguard Personal Advisor Services, also emphasizes suitability as the standard in a release

"Active is particularly well-suited for advised portfolios because advisors can ensure expectations are managed appropriately; allocations are consistent with risk tolerance."

New Thinking

"New thinking appears to be talking hold in Malvern," says Will Trout, director of wealth management at Pleasanton, Calif., consultancy Javelin Strategy & Research.

Alec Lucas

"There is revenue pressure, and Vanguard faces competition for the VPAS investor dollar on a number of fronts, including from increasingly popular asset classes like crypto and private capital investment.

"The rise of direct indexing and model adoption by advisors also put pressure on managed account margins," he explains, via email.

Vanguard began to add private equity access to its brokerage accounts in May, with access for VPAS clients in the works. See: Vanguard Group's private equity retail push gets real.

It added direct-indexing, acquiring JustInvest in July. See: Vanguard Group buys JustInvest. It continues to snub crypto. See: Vanguard's crypto take includes nothing to turn a red light green.

"Every VPAS portfolio is personalized to meet the needs, preferences and investment objectives of each client," says Baldwin.

Defining risk

For now, Vanguard is drawing no bright line limit in its introduction of the active funds in terms of allocation or dollar amount.

Anders Jones

That contrasts, for example, with Wealthfront's introduction of higher-risk, higher-fee, risk-parity fund investments to all indexed ETF portfolios in 2018.

The Palo Alto, Calif., robo-advisor limited the allocation to 20% but still suffered criticism when returns faltered out of the gate. See: Amid pandemic, Wealthfront's risk parity fund faces rough stretch, reviving questions about the wisdom of a 'millennial' robo using something as 'Wall Street' as leverage and active management

Vanguard also declined comment on the parameters it uses to determine a VPAS client's risk tolerance to ensure their suitability for the new portfolio.

And it declined to explain why it is now requiring clients to authorize allocations to the active portfolios managed by VPAS advisors.

VPAS has, however, been a smashing success, growing into the largest RIA in the United States from a nearly cold start in 2015. The active portfolio move solves for a multitude of challenges Vanguard will likely face in the future, both as a wealth manager and as an asset manager.

Pushing hard

Vanguard may win even bigger on the asset management side where it's already pushing hard into an embrace of active management.

Jeffrey DeMaso

It will likely keep adding new active funds, says Jeffrey DeMaso, director of research at $6.5 billion AUM Newton, Mass., RIA Adviser Investments, via email.

"Vanguard has largely run the index fund race to its near conclusion. There are only so many index funds to launch and run, but there are more active opportunities ahead," he explains.

Its RIA gives it remote control over how its higher-volatility funds get managed as part of portfolios during downturns in the markets, Cleborne adds in the release.

"Clients are supported and coached through periods of underperformance," he adds.

Philosophical difference

Vanguard is still squarely situated as a beta-first culture, says Chris Shea, chief investment officer of Austin, Texas, RIA, WealthSource, via email.

Chris Shea

"I don't think this is the beginning of a cultural shift. Vanguard is and has long been a major provider of active management while carefully preserving their low-cost, passive-investing brand."

"By including higher-margin active funds, even at small allocations, Vanguard can meaningfully improve their revenue per account," he adds.

By adding an active conviction portfolio to VPAS, Vanguard shows it is not willing to remain captive to the reputation -- fairly or unfairly -- foisted upon it, says Lucas.

"There may have been a bit of a philosophical shift as index products have commoditized. In other words, having top notch high-conviction active, if you can achieve that, will be an important differentiator in a world of ultra-low to no-fee index funds," he explains.

"With its paternalistic ethos, Vanguard [also] had no way to coach investors through the kind of rough patches necessary to succeed with high-conviction active until the PVAS business."

The company will also make its forthcoming active portfolios available to investors with employer-sponsored retirement plan accounts managed by VPAS, but only if they have more than $250,000 to invest, according to the linked release.

Cross-selling machine

VPAS investors get exclusive access to three new funds, the Select Dividend Growth Fund, the Select International Growth Fund and the Select Global Value Fund.

As part of the initiative, Vanguard will also funnel RIA assets into two existing active funds -- The Vanguard International Core Fund and Vanguard Capital Opportunity Fund, which have fees of 46 basis points and 35 basis points, respectively.

Its three new funds carry expense ratios of 45 basis points (Dividend Growth), 40 basis points (Global Value), and 42 basis points (International Growth), respectively, versus typical industry fees of 90 basis points, 110 basis points, and 113 basis points for similar products, according to the firm.

VPAS' big selling point is that it provides a human-RIA service for 30 bps, which is less than a third of what most competitive offers charge.

Having Vanguard funds in VPAS portfolios bolsters its economics further, for an all-in take closer to 50 basis points or .5%. Adding active funds should raise this all-in haul of revenue.

"Above all else, Vanguard is a distribution and cross-selling machine," says Anders Jones, founder and CEO of Baltimore upstart virtual financial planner, Facet Wealth, via email.

"Vanguard stole a whole bunch of market share from active managers and led a broader shift towards, low-cost passive index funds. It will be very interesting to see what kind of flows those funds get in the next couple of quarters," he adds.

Fund breakdown

Of Vanguard's three new funds, its Select Dividend Growth Fund, managed by Wellington Management, will invest in established large-cap companies it deems likely to increase dividends over time.

Don Kilbride

Don Kilbride, senior managing director, partner, and portfolio manager at Wellington will manage the new fund, which will run a more concentrated stock selection than the Vanguard Dividend Growth Fund (VDIGX), which he oversees.

VDIGX currently holds stakes in 41 companies. Its largest holdings include Johnson & Johnson, McDonalds, United Health, American Express, and Coca-Cola.

The Select Global Value Fund, a contrarian investing fund, again managed by Wellington, will invest in companies it believes the market is slow to reward. Vanguard portfolio manager David Palmer, who also manages the company's Windsor Fund, will manage the Select Global Value Fund.

The Windsor Fund holds stakes in Bank of America, Wabtec, MetLife, T-Mobile, and Raymond James.

The Select International Growth Fund will determine a narrow list of companies that its manager, Bailie Gifford Overseas, deems likely to outperform the market. Like the Select Dividend Growth Fund, the new fund will provide a more concentrated version of an established Vanguard fund, in this case its International Growth Fund (VWIGX).

VWIGX currently holds stakes in 126 companies. Its largest holdings include ASML, Tencent, MercadoLibre, Moderna, and Kering. Its concentrated form will be managed by Bailie Gifford portfolio managers James Anderson and Lawrence Burns.

Vanguard's roots

The price difference between many index funds is also down to nickels and dimes, which will drive active launches, according to Alec Lucas, a Vanguard observer and senior analyst for manager research at Morningstar.

John C.

"Vanguard designed its ... [funds] under the belief that rock-bottom fees would make net returns superior to most actively managed peers and give them a good shot to outperform their benchmarks, too.

"This worked very well when industry-wide fees were much higher but is less effective as fee compression accelerates," he explains, via email

"It represents a needed shift of Vanguard’s strategy in response to industry changes Vanguard helped to bring about."

Yet Vanguard insists that its guiding philosophy is unchanged; this despite the fact that its founder, the late John C. "Jack" Bogle, pioneered passive, low-cost, index-based investing and called active management "unnecessary."

"Vanguard’s roots are in active, dating back to 1929 with the founding of Vanguard Wellington Fund, and we’ve offered an array of actively managed portfolios since our founding," says Baldwin.

"Active management is nothing new at Vanguard," she adds.

That said, Vanguard has struck an increasingly bullish tone on active management, since Tim Buckley took over as CEO in 2018.

Since Buckley took the CEO spot at the company, it has launched its first actively managed US ETFs, its first active ESG funds, and a number active fixed-income funds and ETFs.

In 2020, Buckley publicly pressed "to see active have a resurgence," that would blend Vanguard's cost-cutting modus operandi with portfolios managed by expert stock-pickers. See: Vanguard re-applies itself to active fixed-income funds.

Today, Vanguard, with 11,000 employees, actively manages $1.7 trillion in client assets -- just over a fifth of its total AUM.

Tim Buckley

The Vanguard Group | Vanguard Personal Advisor Services

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