Vanguard, whose name was inspired by an early 18th century British warship, now truly rules the fund industry seas.
Over the past three years, Vanguard has sopped up $823 billion in investor funds. That's about 8.5 times the $97 billion in net inflows to all the other 4,000 fund companies combined, according to an article in
The New York Times, which says that Vanguard's popularity and volume come "as an existential shock to a mutual industry that has long been resistant to change."
In January and February alone, the Times said, Vanguard took in nine out of every $10 invested in a United States mutual fund or exchange-traded fund.
In analyzing the effect of that tsunami of money on the Valley Forge, Pa.-based fund firm, the Times notes the hiring of 2,000 additional employees, as well continued fee reductions to fund shareowners, reflecting economies of scale.
Vanguard now employs 6,000 in customer service to handle almost 8 million customers. Last year, as well as in 2015, almost 350,000 new accounts were added.
Vanguard CEO F. William McNabb III is quoted as saying that the firm has doubled its investment spending in the past five years, but that it is disciplined in its outlays for people and technology. But there have been reports of operational snarls, including website outages, longer-than-usual wait times on the phone and misdirected fund transfers, the Times said.
Still, the unusual nature of Vanguard's ownership structure — in which fund shareholders own the management company — allow the complex to continually pass along cost-savings to fund shareholders.
Since 1976, fees on Vanguard funds have fallen to about 0.12% from about 0.70%, the article said. By comparison, Lipper calculates that the average fee for all mutual funds is currently 1%, although it has been coming down rapidly.
As fund buyers increasingly come to realize that a dollar saved in fees is a dollar earned in return, the Vanguard juggernaut continues to gain strength.
