Is Vanguard anti-competitive?

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zmaqoptyxbglp
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Is Vanguard anti-competitive?

Post by zmaqoptyxbglp » Thu May 17, 2018 11:50 pm

New investor here. When you say that Vanguard is returning returns to the shareholders (i.e. its funds i.e. its fund holders) in the form of lower costs, does it not mean that it is avoiding paying corporate taxes on what would otherwise be treated as earnings?

Is that not anti-competitive?

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Re: Is Vanguard anti-competitive?

Post by willthrill81 » Fri May 18, 2018 12:21 am

zmaqoptyxbglp wrote:
Thu May 17, 2018 11:50 pm
New investor here. When you say that Vanguard is returning returns to the shareholders (i.e. its funds i.e. its fund holders) in the form of lower costs, does it not mean that it is avoiding paying corporate taxes on what would otherwise be treated as earnings?

Is that not anti-competitive?
Not at all. Vanguard isn't earning the money and then distributing to fund holders like a corporation. Vanguard is simply the broker for the transactions, just like every other investment broker out there.

The corporations that are owned through Vanguard's fund must pay corporate tax on their earnings.
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Re: Is Vanguard anti-competitive?

Post by zaboomafoozarg » Fri May 18, 2018 12:46 am

Is a municipal credit union anti-competitive?

Is a local cooperative anti-competitive?

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Re: Is Vanguard anti-competitive?

Post by zmaqoptyxbglp » Fri May 18, 2018 1:02 am

Credit unions are not-for-profit cooperatives, which is not a status Vanguard has as a for profit corporation, as far as I understand.

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Re: Is Vanguard anti-competitive?

Post by Pajamas » Fri May 18, 2018 1:22 am

zmaqoptyxbglp wrote:
Fri May 18, 2018 1:02 am
Credit unions are not-for-profit cooperatives, which is not a status Vanguard has as a for profit corporation, as far as I understand.
Vanguard is a mutual organization, which has a long history in the U.S. financial sector.

https://en.wikipedia.org/wiki/Mutual_organization

Besides, even for-profit corporations don't pay corporate taxes if they don't have earnings and can even get tax offsets for operating losses.

Similarly, you could tell your employer that you are willing to work for less in order to avoid taxes on earnings. Tax avoidance is legal. Tax evasion is not.

As far as it being anti-competitive, any company is free to match Vanguard's fees or charge less or charge more but offer better service.

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Re: Is Vanguard anti-competitive?

Post by zmaqoptyxbglp » Fri May 18, 2018 1:28 am

Interesting read. But from the very page you cited:

"At one time, most major U.S. life insurers were mutual companies. For many years, the tax status of such organizations was open to dispute, as they were technically nonprofit organizations. Eventually, it was agreed that federal taxation would be based on their share of business: for instance, in years in which mutual companies represented half of the business, they would be responsible for half of the taxes paid by the industry."

They were still paying taxes.

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Re: Is Vanguard anti-competitive?

Post by Pajamas » Fri May 18, 2018 1:39 am

zmaqoptyxbglp wrote:
Fri May 18, 2018 1:28 am
Interesting read. But from the very page you cited:

"At one time, most major U.S. life insurers were mutual companies. For many years, the tax status of such organizations was open to dispute, as they were technically nonprofit organizations. Eventually, it was agreed that federal taxation would be based on their share of business: for instance, in years in which mutual companies represented half of the business, they would be responsible for half of the taxes paid by the industry."

They were still paying taxes.
Vanguard does pay taxes when it is required to do so, such as to many U.S. states and foreign countries.

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Re: Is Vanguard anti-competitive?

Post by zmaqoptyxbglp » Fri May 18, 2018 1:40 am

From my PM, I sense a fair amount of implied malevolence due to my question here. Not sure why it is so hard to extend a sense of good faith to others that disagree with you or perhaps are just ignorant of the fact of the matter.

I have a reasonable chunk of money (my only equity investment) in a Vanguard fund at my current employer's 401(k), and was planning on opening a taxable account for general investing at Vanguard. I'm just genuinely curious/concerned about a company with an AUM larger than the GDP of Japan being able to do what it is doing, and wanted to hear thoughts people on this forum had. I'm not trying to troll or argue for the sake of arguing...

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Re: Is Vanguard anti-competitive?

Post by zmaqoptyxbglp » Fri May 18, 2018 1:47 am

Pajamas wrote:
Fri May 18, 2018 1:39 am
zmaqoptyxbglp wrote:
Fri May 18, 2018 1:28 am
Interesting read. But from the very page you cited:

"At one time, most major U.S. life insurers were mutual companies. For many years, the tax status of such organizations was open to dispute, as they were technically nonprofit organizations. Eventually, it was agreed that federal taxation would be based on their share of business: for instance, in years in which mutual companies represented half of the business, they would be responsible for half of the taxes paid by the industry."

They were still paying taxes.
Vanguard does pay taxes when it is required to do so, such as to many U.S. states and foreign countries.
I was not suggesting that Vanguard was evading taxes. Just noting that it is able to pass on the earnings without taxation to its shareholders, while a normal corporation would need to pay corporation taxes on their earnings before returning it to shareholders, be it in the form of dividends, stock buybacks or reinvestment for future growth in earnings/revenue with the expectation of capital appreciation.
Last edited by zmaqoptyxbglp on Fri May 18, 2018 1:47 am, edited 1 time in total.

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Re: Is Vanguard anti-competitive?

Post by Pajamas » Fri May 18, 2018 1:47 am

zmaqoptyxbglp wrote:
Fri May 18, 2018 1:40 am
From my PM, I sense a fair amount of implied malevolence due to my question here. Not sure why it is so hard to extend a sense of good faith to others that disagree with you or perhaps are just ignorant of the fact of the matter.
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zmaqoptyxbglp wrote:
Fri May 18, 2018 1:47 am
I was not suggesting that Vanguard was evading taxes. Just noting that they're able to pass on the earnings without taxation to its shareholders, while a normal corporation would need to pay corporation taxes on their earnings before returning it to shareholders, be it in the form of dividends, stock buybacks or reinvestment for future growth in earnings/revenue with the expectation of capital appreciation.
Companies like REITs and MLPs don't generally pay taxes on income they pass through to shareholders.

https://en.wikipedia.org/wiki/Real_esta ... ment_trust

https://en.wikipedia.org/wiki/Master_li ... artnership

As far as Vanguard, they don't pass earnings through to any external shareholders (at least not that I'm aware of) so I don't see how that applies. That is sort of the whole point of a mutual organization, the customers benefit, not outside shareholders.

I'm not following your thinking about taxable earnings, charging lower fees, and anticompetitive behavior. Investment companies and banks and similar financial companies of all different organizational types commonly compete by charging lower fees, paying higher interest rates for deposits, charging lower interest rates on loans, etc.

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Re: Is Vanguard anti-competitive?

Post by zmaqoptyxbglp » Fri May 18, 2018 2:13 am

Pajamas wrote:
Fri May 18, 2018 1:47 am
zmaqoptyxbglp wrote:
Fri May 18, 2018 1:40 am
From my PM, I sense a fair amount of implied malevolence due to my question here. Not sure why it is so hard to extend a sense of good faith to others that disagree with you or perhaps are just ignorant of the fact of the matter.
Welcome to Bogleheads! :beer
zmaqoptyxbglp wrote:
Fri May 18, 2018 1:47 am
I was not suggesting that Vanguard was evading taxes. Just noting that they're able to pass on the earnings without taxation to its shareholders, while a normal corporation would need to pay corporation taxes on their earnings before returning it to shareholders, be it in the form of dividends, stock buybacks or reinvestment for future growth in earnings/revenue with the expectation of capital appreciation.
Companies like REITs and MLPs don't generally pay taxes on income they pass through to shareholders.

https://en.wikipedia.org/wiki/Real_esta ... ment_trust

https://en.wikipedia.org/wiki/Master_li ... artnership

As far as Vanguard, they don't pass earnings through to any external shareholders (at least not that I'm aware of) so I don't see how that applies.

I'm not following your thinking about taxable earnings, charging lower fees and anticompetitive behavior. Investment companies and banks and similar financial companies of all different organizational types commonly compete by charging lower fees, paying higher interest rates for deposits, charging lower interest rates on loans, etc.
So REITs are RICs (Regulated Investment Companies) as defined under the Investment Company Act of 1940, just like Mutual Funds and ETFs, that are allowed to act as untaxed a.k.a. pass through conduits of investment, on the condition that they pass through all profits to the shareholders who then pay taxes. MLPs though broad in scope first are now heavily restricted in scope to a very small sector of the economy to avoid tax revenue losses, but are definitely not corporations in terms of their legal nature.

These structures are different from that of a corporation which say issues common stock that have a multitude of holders (these holders being the Vanguard funds in the case of The Vanguard Group Inc). The corporation is required by law to pay out taxes on its earnings before being able to return any value to shareholders (at least after having attained maturity in the long run) through dividends, buybacks, capex, etc.

All corporations are subject to this requirement, and no corporation is able to get away without following this requirement (in the long run). But Vanguard is able to "get away" with returning value to its shareholders (Vanguard funds) daily, without ever paying taxes, over an indefinite time horizon.

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Re: Is Vanguard anti-competitive?

Post by Pajamas » Fri May 18, 2018 2:26 am

zmaqoptyxbglp wrote:
Fri May 18, 2018 2:13 am
All corporations are subject to this requirement, and no corporation is able to get away without following this requirement (in the long run). But Vanguard is able to "get away" with returning value to its shareholders (Vanguard funds) daily, without ever paying taxes, over an indefinite time horizon.
Yes, that is a somewhat complicated issue that has been bouncing around the courts for a few years.

http://www.philly.com/philly/blogs/inq- ... 80409.html

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Re: Is Vanguard anti-competitive?

Post by oldcomputerguy » Fri May 18, 2018 5:35 am

Pajamas wrote:
Fri May 18, 2018 2:26 am
Yes, that is a somewhat complicated issue that has been bouncing around the courts for a few years.
Pajamas, you beat me to the punch. I was going to say that the questions raised in the OP were sounding eerily familiar. :wink:
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Re: Is Vanguard anti-competitive?

Post by nisiprius » Fri May 18, 2018 6:50 am

Anti-competitive? Only in the sense that any successful competitor is "anti-competitive." It's hard to compete against a successful competitor.

Beyond the tautology, winning begets winning; Vanguard has economies of scale working for it, now. And, like Fidelity and American funds, both of which have lower expense ratios than average, it is a privately owned company that is not burdened by shareholders demanding that the company serve their interests as well as their customers'.

Vanguard's success is certainly spooking other fund companies. And their attacks on Vanguard, and on passive investing itself, are getting serious and nasty. I am open to the possibility that some of those attacks may have merit. There's a lawsuit against Vanguard working its way through the courts right now.

But please be very careful and critical in what you hear. There is propaganda out there. When the Vanguard 500 index fund was launched, people called it "communistic." Nowadays, that's not bad enough: Sanford C. Bernstein & Co. said a couple of years ago that, their words, "passive investing is worse than Marxism."

Since then, the Marxists at Bernstein & co. have launched two index ETFs (BERN and BRGL) themselves.
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Re: Is Vanguard anti-competitive?

Post by Tycoon » Fri May 18, 2018 6:54 am

No...
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Re: Is Vanguard anti-competitive?

Post by oldcomputerguy » Fri May 18, 2018 7:06 am

zmaqoptyxbglp wrote:
Fri May 18, 2018 2:13 am
These structures are different from that of a corporation which say issues common stock that have a multitude of holders (these holders being the Vanguard funds in the case of The Vanguard Group Inc).
You're mistaken. Vanguard does not issue common stock.
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Re: Is Vanguard anti-competitive?

Post by Independent George » Fri May 18, 2018 7:36 am

zmaqoptyxbglp wrote:
Thu May 17, 2018 11:50 pm
New investor here. When you say that Vanguard is returning returns to the shareholders (i.e. its funds i.e. its fund holders) in the form of lower costs, does it not mean that it is avoiding paying corporate taxes on what would otherwise be treated as earnings?

Is that not anti-competitive?
I am not sure what you mean by anti-competitive. They charge lower fees and gain more customers; other mutual funds have to either post stronger results or lower fees in order to gain business. That's pretty much the definition of competition.

In terms of revenue, yes, Vanguard earns less gross revenue per dollar of AUM in their fund, but they also consequently manage a much larger amount. This is not a question of tax avoidance, but simply a different business model - would you rather have 1.5% of $100M, or 0.1% of 5 trillion?

Furthermore, whatever a mutual fund gives up in fees will be reflected in higher returns by the account holder when they sell. There's no magic here - a mutual fund can't be taxed on money they don't actually earn, while an investor who nets a higher return as a result of lower fees will subsequently pay more taxes on that extra return.

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Re: Is Vanguard anti-competitive?

Post by LadyGeek » Fri May 18, 2018 8:59 am

I removed an off-topic post. The OP is asking about Vanguard's corporate structure, which is on-topic.

The implied reference to a "familiar" topic is for this thread: Vanguard sued for [failing to charge market rates to and then paying taxes on services to its mutual funds] The thread is locked, as the legal process is on-going. Please do not continue the discussion.

Update: I removed a post (below this one) which attempted to continue the discussion.
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Re: Is Vanguard anti-competitive?

Post by LadyGeek » Fri May 18, 2018 9:09 am

I think there is some misunderstanding on fund ownership. Mutual funds are not held by Vanguard, but by a 3rd party. See: Vanguard safety (Custody)

Next, Vanguard is a private company and does not issue stock. Other fund issuers are public, like BlackRock or Schwab.

Next, our blog* shows how Vanguard generates revenue:

- Vanguard Group Inc. book value | Financial Page
- Vanguard funds and payables to Vanguard Group Inc. | Financial Page

* Yes, we have a blog. The link can be found on the left-side menu of the wiki (desktop view only). Financial Page | A Bogleheads® blog
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Re: Is Vanguard anti-competitive?

Post by Clever_Username » Fri May 18, 2018 9:47 am

zmaqoptyxbglp wrote:
Fri May 18, 2018 1:40 am
From my PM, I sense a fair amount of implied malevolence due to my question here. Not sure why it is so hard to extend a sense of good faith to others that disagree with you or perhaps are just ignorant of the fact of the matter.
If you actually received a PM that violates the rules of the site, please bring it to the attention of a moderator. There is a report button for that reason.
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Re: Is Vanguard anti-competitive?

Post by alex_686 » Fri May 18, 2018 10:02 am

zmaqoptyxbglp wrote:
Fri May 18, 2018 2:13 am
So REITs are RICs (Regulated Investment Companies) as defined under the Investment Company Act of 1940, just like Mutual Funds and ETFs, that are allowed to act as untaxed a.k.a. pass through conduits of investment, on the condition that they pass through all profits to the shareholders who then pay taxes. MLPs though broad in scope first are now heavily restricted in scope to a very small sector of the economy to avoid tax revenue losses, but are definitely not corporations in terms of their legal nature.

...

All corporations are subject to this requirement, and no corporation is able to get away without following this requirement (in the long run). But Vanguard is able to "get away" with returning value to its shareholders (Vanguard funds) daily, without ever paying taxes, over an indefinite time horizon.
A couple of points.

REITs and MLP are covered by a different set of laws. The 40 Act - as they say in business - established mutual funds we know today. Opened ended mutual funds, closed end, ETFs, the person who runs a fund from his spare bedroom - all 40 act companies.

All mutual funds are corporations. For example, Vanguard Total Stock Market Index Fund is a corporation. It has a board of directors, files tax returns, and issues common stock. i.e., each share of the fund is 1 share of the common stock. Normally they don't pay taxes and all profits of that fund go to the shareholders.

The fund then hires a administrator and a portfolio manager. They don't have to be the same company. For example, a fund may hire Vanguard to the administrator and Wellington Management and the portfolio manager. If there are profits to be taxed by the treasury it would be at this level.

Lastly, Vanguard is not a mutual, non-profit, not-for-profit, faternal, etc. It is its own weird unique thing. I would prefer if it had a more conventional structure.

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Re: Is Vanguard anti-competitive?

Post by LadyGeek » Fri May 18, 2018 10:12 am

Clever_Username wrote:
Fri May 18, 2018 9:47 am
zmaqoptyxbglp wrote:
Fri May 18, 2018 1:40 am
From my PM, I sense a fair amount of implied malevolence due to my question here. Not sure why it is so hard to extend a sense of good faith to others that disagree with you or perhaps are just ignorant of the fact of the matter.
If you actually received a PM that violates the rules of the site, please bring it to the attention of a moderator. There is a report button for that reason.
Thanks, I missed that. Please see: REPORTING VIOLATIONS AND UNWELCOME PMs
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Re: Is Vanguard anti-competitive?

Post by desafinado » Fri May 18, 2018 1:55 pm

but there ARE people who think index funds do change incentives for owners and managers, e.g. from earlier this week
Matt Levine wrote:The point that “intra-industry diversified institutional investors are also inter-industry diversified” is worth emphasizing. When people worry that common ownership of multiple firms in the same industry by big institutional investors reduces competition in that industry—the antitrust worry that I often shorthand as “should index funds be illegal?”—the theory is more or less that if all the airlines raise prices, rather than compete with each other on price, then they will all make higher profits and benefit their common shareholders at the expense of customers. But, in general, the mutual funds also own the customers. Lambert and Sykuta write:
Intra-industry diversified mutual funds tend also to be inter-industry diversified, and maximizing one industry’s profits requires supracompetitive pricing that tends to reduce the profits of firms in complementary industries. A leading Vanguard fund, for example, holds around 2% of each major airline (1.85% of United, 2.07% of American, 2.15% of Southwest, and 1.99% of Delta) but also holds:

• 1.88% of Expedia Inc. (a major retailer of airline tickets),

• 2.20% of Boeing Co. (a manufacturer of commercial jets),

• 2.02% of United Technologies Corp. (a jet engine producer),

• 3.14% of AAR Corp. (the largest domestic provider of commercial aircraft maintenance and repair),

• 1.43% of Hertz Global Holdings Inc. (a major automobile rental company), and

• 2.17% of Accenture (a consulting firm for which air travel is a significant cost component).

Each of those companies—and many others—perform worse when airlines engage in the sort of supracompetitive pricing (and corresponding reduction in output) that maximizes profits in the airline industry.

If you do want to believe the index-funds-should-be-illegal thesis, then it may not be as simple as “giant diversified mutual funds that own lots of companies in an industry want to maximize the profits of that industry in anti-competitive ways.” Their objective function has to be a bit broader: They must want to maximize the profits of corporations, broadly, at the expense of individual consumers (and workers). That is a more nebulous theory; it is not as simple as “companies in an industry should try to keep prices high and not undercut each other by competing for market share,” but more like “companies in every industry should try to keep corporate profits high generally and not undercut each other by being nice to household consumers or workers.” It is harder to see how corporate managers would maximize that. But it is a pleasingly Marxist diagnosis of institutional investors as advocates, not of reduced competition in any particular industry, but of the interests of the capitalist class generally against those of workers and consumers.

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Re: Is Vanguard anti-competitive?

Post by drk » Fri May 18, 2018 8:52 pm

desafinado wrote:
Fri May 18, 2018 1:55 pm
but there ARE people who think index funds do change incentives for owners and managers, e.g. from earlier this week
Matt Levine wrote:The point that “intra-industry diversified institutional investors are also inter-industry diversified” is worth emphasizing. When people worry that common ownership of multiple firms in the same industry by big institutional investors reduces competition in that industry—the antitrust worry that I often shorthand as “should index funds be illegal?”—the theory is more or less that if all the airlines raise prices, rather than compete with each other on price, then they will all make higher profits and benefit their common shareholders at the expense of customers. But, in general, the mutual funds also own the customers. Lambert and Sykuta write:
Intra-industry diversified mutual funds tend also to be inter-industry diversified, and maximizing one industry’s profits requires supracompetitive pricing that tends to reduce the profits of firms in complementary industries. A leading Vanguard fund, for example, holds around 2% of each major airline (1.85% of United, 2.07% of American, 2.15% of Southwest, and 1.99% of Delta) but also holds:

• 1.88% of Expedia Inc. (a major retailer of airline tickets),

• 2.20% of Boeing Co. (a manufacturer of commercial jets),

• 2.02% of United Technologies Corp. (a jet engine producer),

• 3.14% of AAR Corp. (the largest domestic provider of commercial aircraft maintenance and repair),

• 1.43% of Hertz Global Holdings Inc. (a major automobile rental company), and

• 2.17% of Accenture (a consulting firm for which air travel is a significant cost component).

Each of those companies—and many others—perform worse when airlines engage in the sort of supracompetitive pricing (and corresponding reduction in output) that maximizes profits in the airline industry.

If you do want to believe the index-funds-should-be-illegal thesis, then it may not be as simple as “giant diversified mutual funds that own lots of companies in an industry want to maximize the profits of that industry in anti-competitive ways.” Their objective function has to be a bit broader: They must want to maximize the profits of corporations, broadly, at the expense of individual consumers (and workers). That is a more nebulous theory; it is not as simple as “companies in an industry should try to keep prices high and not undercut each other by competing for market share,” but more like “companies in every industry should try to keep corporate profits high generally and not undercut each other by being nice to household consumers or workers.” It is harder to see how corporate managers would maximize that. But it is a pleasingly Marxist diagnosis of institutional investors as advocates, not of reduced competition in any particular industry, but of the interests of the capitalist class generally against those of workers and consumers.
Just to emphasize: the above is from a section discussing research concluding that "the theory of anticompetitive harm from institutional investors’ common ownership is implausible and that the empirical studies supporting the theory are methodologically unsound." So, yes, some people do worry about it, but they're on weak ground epistemically speaking.

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Re: Is Vanguard anti-competitive?

Post by zmaqoptyxbglp » Fri May 18, 2018 9:34 pm

I don't follow the potential enforcement of such anti-indexing laws. I could do the same thing that a cap weighted index fund does, albeit crudely, but with virtually indistinguishable long run results by holding the stocks in the same proportion as the tracked index.

So to enforce this potential law, would holding certain pair of stocks simultaneously be illegal? That seems unlikely to become law in general in this country, ever.

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Re: Is Vanguard anti-competitive?

Post by FactualFran » Sat May 19, 2018 12:12 pm

alex_686 wrote:
Fri May 18, 2018 10:02 am
All mutual funds are corporations. For example, Vanguard Total Stock Market Index Fund is a corporation. It has a board of directors, files tax returns, and issues common stock. i.e., each share of the fund is 1 share of the common stock. Normally they don't pay taxes and all profits of that fund go to the shareholders.
A, perhaps, trivial detail: mutual funds are not necessarily corporations. At one time the Vanguard funds were not corporations but Delaware statutory trusts.

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Re: Is Vanguard anti-competitive?

Post by alex_686 » Sat May 19, 2018 12:26 pm

FactualFran wrote:
Sat May 19, 2018 12:12 pm
alex_686 wrote:
Fri May 18, 2018 10:02 am
All mutual funds are corporations. For example, Vanguard Total Stock Market Index Fund is a corporation. It has a board of directors, files tax returns, and issues common stock. i.e., each share of the fund is 1 share of the common stock. Normally they don't pay taxes and all profits of that fund go to the shareholders.
A, perhaps, trivial detail: mutual funds are not necessarily corporations. At one time the Vanguard funds were not corporations but Delaware statutory trusts.
What practical difference is there? Separate entity from the fund family parent, ownership belongs to the shareholders, etc. This is just a different flavor of corporations - or am I missing something here?

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Re: Is Vanguard anti-competitive?

Post by FactualFran » Mon May 21, 2018 2:01 pm

alex_686 wrote:
Sat May 19, 2018 12:26 pm
FactualFran wrote:
Sat May 19, 2018 12:12 pm
alex_686 wrote:
Fri May 18, 2018 10:02 am
All mutual funds are corporations. For example, Vanguard Total Stock Market Index Fund is a corporation. It has a board of directors, files tax returns, and issues common stock. i.e., each share of the fund is 1 share of the common stock. Normally they don't pay taxes and all profits of that fund go to the shareholders.
A, perhaps, trivial detail: mutual funds are not necessarily corporations. At one time the Vanguard funds were not corporations but Delaware statutory trusts.
What practical difference is there? Separate entity from the fund family parent, ownership belongs to the shareholders, etc. This is just a different flavor of corporations - or am I missing something here?
I don't know the details of the differences between a mutual fund being a corporation versus being a trust. I vaguely remember that years ago when the Vanguard funds became trusts rather than corporations, that a reason given was that doing so would reduce fund expenses. As I wrote, it is "A, perhaps, trivial detail".

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Phineas J. Whoopee
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Re: Is Vanguard anti-competitive?

Post by Phineas J. Whoopee » Mon May 21, 2018 2:14 pm

zmaqoptyxbglp wrote:
Thu May 17, 2018 11:50 pm
New investor here. When you say that Vanguard is returning returns to the shareholders (i.e. its funds i.e. its fund holders) in the form of lower costs, does it not mean that it is avoiding paying corporate taxes on what would otherwise be treated as earnings?

Is that not anti-competitive?
Some of Vanguard's competitors who are being out-competed certainly book time on cable shows to claim it is.

Heck, seemingly, hath no fury like a stockbroker who doesn't know where next month's boat payment is coming from.

PJW

FactualFran
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Re: Is Vanguard anti-competitive?

Post by FactualFran » Mon May 21, 2018 2:49 pm

zmaqoptyxbglp wrote:
Thu May 17, 2018 11:50 pm
New investor here. When you say that Vanguard is returning returns to the shareholders (i.e. its funds i.e. its fund holders) in the form of lower costs, does it not mean that it is avoiding paying corporate taxes on what would otherwise be treated as earnings?
Concerning mutual funds avoiding paying income taxes, here is how the Wikipedia Mutual fund article puts it:
The Revenue Act of 1936 established guidelines for the taxation of mutual funds. Mutual funds are not taxed on their income and profits if they comply with certain requirements under the U.S. Internal Revenue Code; instead, the taxable income is passed through to the investors in the fund.

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