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The Vanguard Group

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Vanguard
Company typeClient owned
IndustryInvestment management
FoundedValley Forge, Pennsylvania (1975)
HeadquartersMalvern, Pennsylvania, USA
Key people
William McNabb, President and CEO; John J. Brennan, Chairman; John C. Bogle, Founder (retired)
ProductsMutual funds, Exchange-traded funds, Brokerage, Asset Management
RevenueN/A
Number of employees
12,000+ (2008)
Websitewww.vanguard.com
For the anarchist group, see Vanguard Group (anarchist).

Vanguard is a United States investment management company that manages approximately $1 trillion[1] in assets, based in Malvern, Pennsylvania. It offers mutual funds and other financial products and services to individual and institutional investors in the United States and abroad. Founder and former chairman John C. Bogle is credited with the creation of the first index fund available to individual investors, the popularization of index funds generally, and driving costs down across the mutual fund industry.

Vanguard is unusual among mutual-fund companies since it is owned by the funds themselves. In this structure, each fund contributes a set amount of capital towards shared management, marketing, and distribution services. The company says that this structure better orients management towards shareholder interests.[2] Other mutual-fund sponsors are expected simultaneously to make a profit for their outside owners and provide the most cost-effective service to funds for their shareholders.

The index fund philosophy

For his undergraduate thesis at Princeton, John C. Bogle conducted a study in which he found around three quarters of mutual funds did not earn any more money than if they invested in the largest 500 companies simultaneously, using the S&P 500 stock market index as a benchmark[citation needed]. In other words, three out of four of the managers could not pick better specific "winners" than someone passively holding a basket of the 500 largest public U.S. companies. The managers could pick specific stocks which would do as well as picking the 500 largest stocks (essentially doing as well as random chance would dictate), but the cost to pay their expenses, as well as the high taxes incurred through active trading, resulted in underperforming the index.[3]

History

The argument at the time was that it was impossible to invest in an index. John Bogle used this information and attempted to create a way that one could invest in an index. Having founded Vanguard as a broker-sold mutual fund company, he quickly turned the company into a no-load fund firm (meaning that the buyer pays no sales commission — called a "load" — when buying or selling fund shares) and in 1976 introduced his first index fund. This first index for individual investors, called the Vanguard 500 (which invested in the 500 companies that made up the S&P 500), has since out-performed many other competing large mutual funds.[4] Over $100 billion is invested in this mutual fund, and Vanguard has since created other index funds that focus on stocks in particular industries, countries, or companies of varying size (such as "small-cap" or "mid-cap" indexes).

Bogle retired from Vanguard as chairman in 1999 and was succeeded by Jack Brennan. On August 31, 2008, William McNabb succeeded Jack Brennan as Vanguard's CEO, having served as the organization's president since March of that year.

Since its founding in 1975, Vanguard has grown to become the world’s largest pure no-load mutual fund company. While mostly known for its low-cost index funds, Vanguard also offers a variety of low-cost, actively managed mutual funds and a line of exchange-traded funds (originally branded as VIPERs.) Vanguard also provides brokerage services, variable and fixed annuities, educational account services, financial planning, asset management, and trust services.

Vanguard has contracted the management of its actively managed funds to various investment firms and sets a portion of the management expenses paid by shareholders based on the fund's performance. Its oldest fund is the Wellington Fund, formed on July 1, 1929 and managed by Wellington Management Company.

See also

Data

References

  1. ^ https://personal.vanguard.com/us/content/Home/WhyVanguard/AboutVanguardWhoWeAreContent.jsp
  2. ^ Vanguard Marketing Corp. "The Vanguard Difference". Accessed 7 November 2008.
  3. ^ BusinessWeek.com: The Vanguard Group Overview
  4. ^ Fool.com: Index Funds | Index Mutual Funds | Investing in Index Funds

http://www2.standardandpoors.com/spf/pdf/index/SPIVA_Report_Year-End_2008.pdf

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