Vanguard: The Alpha Disrupter - [Business Breakdowns, EP. 83]

8 snips

Nov 9, 2022

Eric Balchunas, a senior ETF analyst at Bloomberg and author of "The Bogle Effect," discusses Vanguard's revolutionary impact on the investment landscape. He dives into the firm's remarkable growth, emphasizing its unique mutual ownership model that drives low costs. The conversation highlights Vanguard's role in the rise of passive investing and its strategic advantages over mutual funds. Balchunas also touches on potential regulatory challenges and how Vanguard's legacy, shaped by founder Jack Bogle, continues to influence the industry.

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INSIGHT

Vanguard's Immense Scale

Vanguard manages $7.5 trillion and owns ~8.5% of every public US company.
They dominate with 27-28% of US fund assets, double Fidelity's peak.

INSIGHT

Drivers of Growth

Lower fees, advisor shift, experience, and internet access drove Vanguard's growth.
It took time for fees to drop below 10 basis points, a revolutionary level.

INSIGHT

Unique Ownership Structure

Vanguard's mutual ownership lets investors vote to lower fees, benefiting themselves.
This unique structure and Bogle's advocacy drove indexing's success.

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This is Zack Fuss, an investor at Irenic Capital, and today we’re breaking down Vanguard. Vanguard and its founder, Jack Bogle, have ushered in an era of low-cost investment, which has left its mark on the entire industry. Today, the business commands $7.5 trillion of assets under management and owns approximately 8.5% of any given public company in the US. To break down Vanguard, I’m joined by Eric Balchunas, a senior ETF analyst at Bloomberg and author of The Bogle Effect. We explore the firm’s unique ownership structure, which in large part enabled its success, look at the potential for regulation to slow Vanguard down, and assess the unique figure that founded the business, Jack Bogle. Please enjoy this breakdown of Vanguard.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

[00:02:24] - [First question] - The size and scale of Vanguard as it exists today

[00:05:45] - Some of the secular forces that has allowed Vanguard to capture so much of the market

[00:09:04] - How Vanguard generates revenue and thoughts on its ownership structure

[00:12:36] - What the fee structure would look like as an investor buying an ETF versus a fund

[00:15:10] - The key differences of investing in a Vanguard ETF compared to a mutual fund

[00:18:20] - Market share of the key players and the industry landscape

[00:21:24] - How big of a player ARK is in relation to how much media coverage they get

[00:22:33] - Jack Bogle’s history, his thesis on mutual funds, and starting Vanguard

[00:28:07] - What it was like transitioning to new leadership given Jack’s fans and supporters

[00:32:10] - The thing that allows Vanguard to attract more funds despite their competitors

[00:35:58] - Complimentary services their competitors are offering that Vanguard is considering to capture more market share

[00:42:59] - Potential regulatory risk that could pose a threat to Vanguard’s growth

[00:47:27] - How Vanguard has managed to avoid headlines unlike Blackrock

[00:48:56] - The lessons for investors and builders when studying Vanguard’s story