Who Owns Vanguard, the Index Investing Pioneer?
John Bogle, who founded The Vanguard Group, died in 2019. Who owns Vanguard now, and where do its profits go?
The Vanguard Group, the world’s second-largest money manager, had $8.1 trillion in assets spread across 422 funds (including 215 in the U.S.) at the end of Jan. 2022. Its founder, John Bogle died in 2019. Who owns Vanguard now?
In 1975, Bogle made index investing accessible by launching the first public index fund tracking the S&P 500. This was two years after American National Bank and Wells Fargo launched index funds for institutional clients.
Bogle pioneered index investing but wasn’t happy with ETFs
While Bogle took index investing to the masses, he wasn’t pleased when ETFs were launched in 1993 as an offshoot to index investing. The first was the State Street SPDR S&P 500 ETF, which is still the world’s biggest and most liquid ETF.
Vanguard waited until 2001 to launch its first ETF, the Vanguard Total Stock Market ETF (VTI). By that time, Bogle wasn’t playing a leading role at Vanguard.
Most money managers are publicly traded
Most money managers, including BlackRock, State Street, UBS, and Goldman Sachs, are publicly traded companies. As a result, they're owned by stockholders, with institutions holding the largest stake.
Vanguard isn't publicly traded
Despite being the world’s second-largest money manager, Vanguard isn't publicly traded. It doesn't have stock, and you can't invest in Vanguard in the private market.
Who owns Vanguard, then?
Vanguard has a different shareholding structure, with shareholders owning its funds and those funds owning Vanguard. As a result, Vanguard fund investors own the company.
This structure aims to ensure that there's no conflict of interest between the fund investors and the investors in the company. Conflicts sometimes arise in other structures, such as those with publicly traded money managers—as they have the responsibility to enhance value for shareholders, they may charge fund investors higher fees.
Vanguard charges low fees
Since Vanguard doesn't have to worry about its stock price, it can offer better value to fund investors. The blended average annual expense ratio in its U.S. funds was only 9 basis points in 2021, and Vanguard charges only 3 basis points on its S&P 500 ETF. If you're a long-term investor, a difference of just a few basis points in annual expenses could impact your returns significantly over the long term. In 2020, BlackRock lowered the fees on its S&P 500 ETF to match Vanguard's.
Where do Vanguard's profits go?
Since Vanguard is owned by funds, its profits belong to them. Vanguard uses them to lower the fund’s fees, benefiting fund investors.