Gus Sauter: the next "Bogleheads on Investing" podcast guest

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Rick Ferri
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Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Rick Ferri » Wed Jan 02, 2019 5:17 pm

I am interviewing Gus Sauter, former Chief Investment Officer (CIO) of Vanguard as my next podcast guest. Gus worked at Vanguard for 25 year and was CIO from 2002 to 2012.

The interview will be recorded on Monday and posted later in the week. If you would like to ask Gus a question, please post it below.

Thank you!

Rick Ferri
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The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by David Jay » Wed Jan 02, 2019 6:32 pm

Please ask him his opinion of the terminal outcome of the “rush-to-the-bottom” on ERs and account minimums (Schwab-no minimums, Fidelity-Zero funds, etc.). Where does it all shake out in the end?
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by CollegePrudens » Wed Jan 02, 2019 6:43 pm

I would love to know his take on the % of equity portfolio in international equity for a median income household approaching retirement. Does he think of international as a static % of total equity irrespective of life/work stage or does he recommend moving the international equity % around based on world market capitalization (or some other factor)?

Keep up the good work on the Bogleheads podcasts Rick!
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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by ReformedSpender » Wed Jan 02, 2019 6:46 pm

Looking forward to it!

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by columbia » Wed Jan 02, 2019 6:46 pm

I’d like to know why they don’t offer a currency hedged version of VT.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Mel Lindauer » Wed Jan 02, 2019 6:49 pm

Ask Gus if he'll be doing a presentation again at this year's Bogleheads' Conference.
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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by asset_chaos » Wed Jan 02, 2019 6:53 pm

Does he think all this high frequency, dark pool, algorithmic, exotic, etc trading helps or hinders running index funds?

Is he still on the investment committee at Australian superannuation fund Sunsuper? Can he get them to make their default super fund indexed and low cost?
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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by JohnDindex » Wed Jan 02, 2019 7:41 pm

Ask him how to explain the consistent outperformance of primecap management. And if he thinks an active/passive strategy is suitable for retail investors.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Scooter57 » Wed Jan 02, 2019 7:59 pm

Ask him why for the past 5 years Vanguard has become so aggressive in growing the company to the point that it is straining infrastructure and making old timers like me (with Vanguard since 1988) concerned that chasing AUM may be of more benefit to executives whose salaries have an AUM component than to the good of fund owners. The decrepit website, antiquated trading tools, missing search function, and lockouts anytime the market gets busy seem like good reasons to slow down growth.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Cycle » Wed Jan 02, 2019 8:02 pm

Love the BH podcast.

Should we all just be in target and life strategy funds? How much are we really saving with a .05 ER reduction and tax loss harvesting.

What does he think about holding equities in AA at global market weight vs US tilt?
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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by NoHeat » Wed Jan 02, 2019 8:03 pm

Ask whether the advantages of the index fund model are less for corporate bonds than for equities.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by whodidntante » Wed Jan 02, 2019 8:04 pm

Ask him why Vanguard created the S&P 600 value index fund VIOV and the new factor funds (VFMF, VFVA, etc.) and then put them in the dungeon of the website and barely marketed them. Were they made to suit a particular institutional investor?

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by cody69 » Wed Jan 02, 2019 8:05 pm

Wow Rick, another extraordinary podcast guest!

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by GreatOdinsRaven » Wed Jan 02, 2019 10:13 pm

Gus,
I've heard you speak at Bogleheads several times and I always enjoy it. Highlight of the meeting. What I've never understood is how to reconcile your thoughts on smart beta investing (which I assume to mean value, quality, momentum, etc) versus your experience running the Quant Group at Vanguard.

You've mentioned that of your equity mutual funds most (almost all?) are indexed. I've heard you speak on how smart beta doesn't make sense as a strategy when you can instead hold the total market portfolio and make no bets other than on market beta. How did those opinions inform your management of the quantitative funds at Vanguard? Isn't the point to try to exploit those risk factors? I've always wondered if you really believed that value/size/quality/momentum/profitability investing is a bad idea (even for someone with a long horizon and ironclad intestinal fortitude) or whether you really believe that a total market portfolio is really the only choice and that factor investing is "dumb". I ask as a small value and "MCV" investor who has seen many years of under-performance with no plans to change course.

Thank you,
GreatOdinsRaven
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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Jiu Jitsu Fighter » Sun Jan 06, 2019 5:45 am

whodidntante wrote:
Wed Jan 02, 2019 8:04 pm
Ask him why Vanguard created the S&P 600 value index fund VIOV and the new factor funds (VFMF, VFVA, etc.) and then put them in the dungeon of the website and barely marketed them. Were they made to suit a particular institutional investor?
:beer ....and more insight on the factor funds. Opinion on why one should own them over traditional cap-weighted funds and how are they scalable since they are incorporating small-cap in their methodology. I'm pretty sure that he'll give a canned response like, "you're fine just in traditional indexes, but some may want to consider active/factor funds", or the unscientific "core and explore" reasoning.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by treypar » Sun Jan 06, 2019 2:40 pm

Please ask Gus why one should invest in stocks given the current extreme volatility since estimates are for 4% and 3% returns on stocks and bonds respectively over the next ten years.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by packer16 » Sun Jan 06, 2019 3:36 pm

I would be interested in his thoughts on equity expected return in light of Mr. Bogle's more conservative view of 4 to 5% & Aswath Damodaran's view of 8 to 8.5%. Damodaran's view is based upon a very high ERP of 6% plus current 10-year rate of 2.6%. The ERP is derived from a reverse IRR he does that includes market based assumptions. An overview is here: https://youtu.be/gKrBfpN3yto . Also his insight on corp bonds given historically high the 1.6% credit spread of intermediate term corporate bonds versus treasuries. Thanks for the great podcasts Rick.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by ReformedSpender » Sun Jan 06, 2019 4:01 pm

treypar wrote:
Sun Jan 06, 2019 2:40 pm
Please ask Gus why one should invest in stocks given the current extreme volatility since estimates are for 4% and 3% returns on stocks and bonds respectively over the next ten years.
I'm no Gus Sauter but that's an easy one...

'Cus nobody knows nothing

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Riprap » Sun Jan 06, 2019 4:06 pm

Ask if he shares Jack Bogle's concern over the concentration of corporate voting power by a few shareholders like Vanguard, Blackrock, Fidelity etc. To me, this seems to be a real threat to the long term viability of the concept of passive investing.

Also, is there a long term trend away from public capital markets? We hear about there being fewer and fewer companies going public to raise capital.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by saintsfan342000 » Sun Jan 06, 2019 4:10 pm

Maybe see if he'd talk about some of the growing pains Vanguard (and perhaps other investment houses) seem to have experiences. Vanguard customer service has apparently taken a dive, and people frequently complain about their website. Is there a point where Vanguard would ever say "Ok, we've grown enough. We've got a large enough base of loyal customers; there's no need to keep chasing customers by lowering expenses."

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by aristotelian » Sun Jan 06, 2019 4:19 pm

Riprap wrote:
Sun Jan 06, 2019 4:06 pm
Ask if he shares Jack Bogle's concern over the concentration of corporate voting power by a few shareholders like Vanguard, Blackrock, Fidelity etc. To me, this seems to be a real threat to the long term viability of the concept of passive investing.
+1, this seems to be the most valid critique of indexing. I would like to hear Vanguards take on it as well as any other critiques of indexing they regard as serious.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Rick Ferri » Mon Jan 07, 2019 10:39 pm

This podcast is now available. Thank you to all who participated by asking question. We were able to cover most questions although not all questions due to a time constraint.

"Bogleheads on Investing" podcast guest Gus Sauter

Rick Ferri
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The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Mel Lindauer » Tue Jan 08, 2019 3:51 pm

Another great job, Rick. Keep 'em coming!
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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by sunnywindy » Tue Jan 08, 2019 3:53 pm

If the active ETFs are deemed successful, are they planning to offer more? Potentially more multifactor funds in International and EM?

Thanks!
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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by friar1610 » Tue Jan 08, 2019 4:59 pm

Listened to it today on the treadmill. Excellent interview; good workout.
Friar1610

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by CollegePrudens » Wed Jan 09, 2019 12:35 pm

Heard it today. Nicely done, again.
Enjoyed the history lesson!
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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Rick Ferri » Wed Jan 09, 2019 2:38 pm

sunnywindy wrote:
Tue Jan 08, 2019 3:53 pm
If the active ETFs are deemed successful, are they planning to offer more? Potentially more multifactor funds in International and EM?

Thanks!
Gus is no longer employed by Vanguard and since investment companies do not make announcements like this public, he would not know.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by packer16 » Wed Jan 09, 2019 2:51 pm

Rick,

I know your interview was time constrained but did you ask him about his thoughts on credit spreads & the ERP that maybe did not make it into the interview. Thanks. BTW you may want to interview Aswath Damodaran as he has some interesting insights & contrarian views on the market (ERP in particular). His blog is here:

http://aswathdamodaran.blogspot.com/

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Re: Gus Sauter: the next "Bogleheads on Investing" podcast guest

Post by Rick Ferri » Wed Jan 09, 2019 3:01 pm

Gus and I did not talk about current market conditions or his thoughts valuation or the ERP. Aswath Damodaran would make an excellent guest at some time in the future.

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

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