The Vanguard Group

From Bogleheads
The Vanguard Group
FoundedMalvern, PA
(September 24, 1974)
FounderJohn Bogle
Valley Forge, PA

with offices in

United States:
Charlotte, NC
Scottsdale, AZ


Amsterdam, London, Paris, Zurich

Brisbane, Melbourne, Perth, Sydney

Asia / Pacific:

Beijing, Hong Kong, Tokyo, Singapore
Key people
F. William McNabb III, Chairman and CEO, Tim Buckley CEO (Jan. 1, 2018)
ProductsMutual funds
Exchange-traded funds
529 plan portfolios
Collective Investment Trusts
Annuity subaccounts
Brokerage services
AUMUS$5.3 trillion
Number of employees
Footnotes / references
Vanguard fast facts

The Vanguard Group of investment companies was founded on September 24, 1974 by its first Chairman, John C. Bogle.[1]

The firm is based in Malvern, Pennsylvania and offers a wide range of financial products and services, including mutual funds, exchange-traded funds (ETFs), brokerage services, institutional and personal retirement plan services, college savings programs, charitable endowment services, and professional advisory and trust[2] services.

Since 1996, the firm has established financial service companies in Europe and Asia.

At the conclusion of 2018, Vanguard was managing approximately $5.3 trillion in assets.[3] Four chief executive officers have led Vanguard over its corporate history: John Bogle (1975 - 1996); John Brennan (1996 - 2008); William McNabb (2008 - 2018); and Tim Buckley (2018 - present).


John Bogle era (1975–1996)

The Vanguard Group was an outcome of a 1974 corporate struggle at the Wellington Management Company that resulted in the firing of Wellington's CEO, John Bogle. Bogle appealed to the Wellington Company's mutual funds' board of directors to retain him as the funds' chairman and CEO. The board agreed, and a settlement was reached whereby a new firm, Vanguard, was established (May 1, 1975) to handle administrative and legal services for the funds. At its founding, the firm had eleven funds, 28 employees, 372,648 investor accounts and provided an average expense ratio of 0.66%.[4]

Over the next two years the new firm instituted a series of steps that reflected Bogle's vision of mutual fund management. The new firm was established as a mutual organization with the mutual funds (and by extension, fund shareholders) owning the management company, which would provide services to the funds at cost and reduce conflicts of interest.[5] (The SEC gave final approval of Vanguard's mutual form of business organization in 1981.)[6] In 1976, the firm created the first index fund available to retail investors, Vanguard Index Trust (now known as Vanguard 500 Index Fund). In 1977, the firm abandoned broker distribution and moved to no-load fund distribution. The year also saw the creation of a series of defined maturity bond funds (short term, intermediate term, and long term).[5]

Under John Bogle's direction (1975–1996), Vanguard became known for providing both low costs and clear direct communication with fund shareholders. In 1981 Vanguard began managing most of its fixed income funds in-house with the establishment of its Fixed Income Group.[4] The firm continued its development of index funds, bringing the first bond index fund to retail investors in 1986 and the first retail international index funds in 1990.[7]

The growth of employer-provided 401k plans led the firm to establish what was to become Vanguard Institutional in 1982. One year later, Bogle partnered with an outside brokerage firm (Pershing) to create Vanguard Brokerage Services (VBS).[8] Bogle continued outside partnerships, this time with insurers (what is now Transamerica Premier Life Insurance Company, and in New York, Transamerica Financial Life Insurance Company) to bring a no-load, no surrender fee, low-cost variable annuity program to the firm in 1991. One of Bogle's final innovations was the creation of Vanguard's series of tax-managed funds in 1994. The following year the company added its investment advisory service (staffed with salaried certified financial planners).[4]

In 1996 John Bogle, nearing mandatory retirement age, transitioned management of Vanguard to his successor CEO, John Brennan. At the close of Bogle's stewardship, Vanguard had grown to 89 funds and 3,927 employees. The firm was managing 6,681,460 investor accounts at an average 0.31% expense ratio.[4]

John Brennan era (1996–2008)

Vanguard headquarters, Malvern, PA.

Under the direction of John Brennan Vanguard began expanding its operations into international markets and offering additional investment services in an ever evolving financial world. The firm made a commitment to technology, culminating in the establishment of on-line trading in 1998.[4]

International expansion began in 1996 when Vanguard created Vanguard Investments Australia Ltd. to serve Australian investors. Over the next seven years additional international investment companies were created to serve other international domiciled investors.

Table 1. Vanguard international expansion
  • 1996 Investments Australia Ltd
  • 1998 Investments Europe NA;
  • 2000 Investments Ltd. Japan;
  • 2002 Services extended to Central and South America, as well as Canada;
  • 2003 Services extended to Singapore[9]

In 2007, Vanguard surpassed the $100 billion mark in assets managed outside the US.[4]

In 1997 Vanguard launched its donor-advised charity program, known as the Vanguard Charitable Endowment Program.[10] The firm also became a large player in the developing 529 savings plan market.

The advent and growing popularity of the ETF provided a growing competitive threat to Vanguard's index fund base. Vanguard responded to this competitive challenge by first offering a program of lower cost shares for certain qualifying investors (Admiral shares established in 2000). Over time the program was to be gradually liberalized to include more of the Vanguard shareholder base. After losing a legal case with Standard and Poors concerning the licensing of the S&P 500 index for a proposed ETF share class of the firm's 500 Index fund, Vanguard soon switched index tracking to MSCI indices and launched its own ETFs, originally called VIPERS (subsequently known as Vanguard ETFs). By the close of Brennan's tenure as CEO, Vanguard was the third largest manager of ETFs.

The firm expanded its offerings of annuities during this period, partnering with insurance companies to offer a deferred fixed annuity and establishing in 2003 a Single Premium Immediate Annuity (SPIA) with both variable and fixed income payout options. The company also opened two series of balanced fund of funds designed for retirement investing. The series of Target Retirement Funds was launched in 2003. The series of Managed Payout funds opened in 2008.

By 2005 Vanguard was managing 130 funds and employing 11,205 people. The firm was managing 21,037,532 shareholder accounts at an average expense ratio of 0.21%.[4]

John Brennan stepped down as Vanguard CEO in 2008, transitioning the firm's direction to William McNabb.

William McNabb era (2008-2018)

Vanguard worldwide diversified asset base


The early years of the McNabb era were marked by evolutionary changes in existing programs. In 2009 Vanguard Brokerage service ended its partnership arrangement with Pershing, as Vanguard decided to run the brokerage internally.[11] The year also marked the expansion of the company's international fund management operations to investors in the United Kingdom when Vanguard opened Vanguard Investments UK Ltd.[12] International expansion continued when Vanguard announced on June 6, 2011, the opening of Vanguard Investments Canada Inc.[13]

In 2010 the company cut the cost of investing for its mutual fund and exchange traded fund shareholders by a broad expansion of lower cost Admiral shares ($10,000 minimum investment) in most of the company's index fund offerings, and by VBS granting commission free transactions on Vanguard ETF transactions.[14] Vanguard also greatly expanded its ETF offerings by launching a suite of new ETFs based on S&P and Russell US stock indices.[15]

The year also saw Vanguard replace its fixed deferred annuity product with a new service designed to bring to investors cost transparency and institutional pricing for deferred and immediate fixed annuities. The new service, Vanguard Annuity Access™, is offered in collaboration with Hueler Investment Services, Inc. through that firm's Income Solutions platform.[16]


In October 2013, in a bid to lower costs, Vanguard announced a change in index providers for many of its US and international index funds. The firm switched from MSCI benchmarks to CRSP and FTSE indexes.

In 2014, continued strong asset accumulation at Vanguard brought global assets under management to 3.1 trillion dollars. Such asset accumulation meant that by year-end Vanguard:

  1. Became the second largest provider of exchange-traded funds, trailing only Blackrock iShares as a provider.
  2. Became the largest provider of defined contribution plans in the U.S.
  3. Became the largest provider of target date retirement funds.[17]

In 2014 the firm announced a new investment advisory program, Personal Advisor Services, designed to offer investors professional investment advice from certified financial planners at a 0.30% asset under management fee.[17]

In August 2018 Vanguard introduced commission-free online transactions on approximately 1,800 ETFs trading on the major exchanges.[18] In November 2018 Vanguard lowered the minimum investment requirements for Admiral Shares from $10,000 to $3,000 for 38 index funds.[19] At year-end 2018, Vanguard was managing 5.3 trillion dollars of investor assets at an asset weighted expense of 0.12% of assets. The firm employed over 15,000 employees.[20]

Tim Buckley era

In 2019 Vanguard retrenched from a number of services offered to investors. On June 19,2019 Vanguard announced plans to transition the client service and account administration for the Vanguard Variable Annuity to Transamerica. Vanguard also discontinued Vanguard Annuity Access®, an online platform that enabled individuals to compare income annuities from insurance companies.[21]

On July 31, 2019 Vanguard discontinued its Vanguard the VanguardAdvantage cash management program. According to Vanguard, less than 2% of eligible clients were using the service, and only half were active users.[22][23]

In late 2022, Vanguard relaunched its cash management program as a pilot called the Vanguard Cash Plus Account.[24] Funds stored in the account are swept to a FDIC insured bank.[25]

Vanguard performance

The Vanguard Group's family wide investment performance, as measured by fund rating services, has been above average.

Vanguard reports the percentage number of its funds surpassing the returns of Lipper peer group averages over one, three, five, and ten year periods. The first tab in the following table provides results as of September 2018.[26]

Morningstar rates fund family investment performance by scoring a firm's asset weighted fund's star ratings within an asset class (US stocks; international stocks; taxable bonds; municipal bonds) and scoring them on a 1 to 5 rating scale, with one representing the lowest rating; five the highest.

A score below 2.5 is an indication that the firm has met with little success in that asset class. A score between 2.5 and 3.5 indicates the firm is about average. A score above 3.5 indicates the firm has a fair amount of prowess. The more funds a firm manages in an asset class, the stronger a signal the Fund Family Score is about the firm's performance.

— Morningstar Data Definitions[27]

The Morningstar measure as of the end of the first quarter of 2019.[28] can be accessed on the second tab of Table 2.

Table 2. Percentage of Vanguard funds which exceeded their peers (2018)

(View Google Spreadsheet in browser, then File --> Download as to download the file.)
Note: If the spreadsheet is blank, select a different sheet, then back to that sheet. The image will be refreshed.

Problematic Vanguard initiatives

Not all of Vanguard's initiatives have proved successful. Some programs have been shuttered. Some mutual funds have been liquidated or merged out of existence into other mutual funds. While not a recognition of failure, Vanguard has at times radically changed a given fund's fundamental investment mandate so that the fund no longer provides investors with the originally designed sector coverage.

Program liquidations

Vanguard's first forays into providing equity real estate investments for investors were the offering of two finite-lived equity REIT stocks, listed originally on the Amex exchange. The Vanguard Real Estate Fund I was offered in 1986[29] and the Vanguard Real Estate Fund II was offered in 1987.[30] These stocks were designed to invest in commercial real estate properties but liquidate between years seven and twelve. The offerings coincided with a down cycle in the real estate markets (concurrent with the savings and loans scandals and real estate tax reform). Returns on the stocks at liquidation were modest. By 1996, growth in the equity REIT market made it feasible for Vanguard to introduce an Equity REIT index fund.

In the fall of 2001, Vanguard expanded its insurance program by offering the Vanguard® Term Insurance Program to its shareholder base. The program offered 10- or 20-year level-premium term insurance with coverage amounts ranging from $100,000 to $10 million.[31] In 2005 Vanguard closed down the program, citing that the plan was not cost effective.[32]

Fund liquidations

The following table shows Vanguard funds that have been merged or liquidated from existence. Fund mergers or liquidations are the primary actions a mutual fund company takes to eliminate poor performing or small net asset funds. However one should note that some of Vanguard's fund mergers (Treasury money market fund and the Institutional bond and developed market funds) were taken to consolidate identical funds into a single fund in order to gain management and cost efficiencies, and that the liquidation/merger of the Preferred Stock and the Insured Tax Exempt funds were due to significant structural changes --tax rate changes on preferred stocks and municipal bond insurance firm bankruptcies-- in the funds' underlying asset classes.

Table 3. Vanguard fund mergers and liquidations
Fund Year Action Link
Vanguard Explorer II Fund 1989 Merged into Explorer Fund
Vanguard Technology Fund 1994 Merged into Explorer Fund 1994 Semiannual Report
Vanguard Service Economy Fund 1994 Merged into Morgan Growth Fund Supplement to Prospectus
Vanguard Trustees Equity U.S. Portfolio 1998 Merged into Growth and Income Fund Supplement to Prospectus
Vanguard Global Asset Allocation Fund 2001 Liquidated Supplement to Prospectus
Vanguard Preferred Stock Fund 2001 Liquidated Supplement to Prospectus
Vanguard Insured Long Tax Exempt Fund 2008 Merged into Long Term Tax Exempt Fund Supplement to Prospectus
Vanguard Treasury Money Market Fund 2009 Merged into Admiral Treasury Fund Supplement to Prospectus
Vanguard Institutional Bond Index Fund 2009 Merged into Total Bond Index Fund Proxy Statement
Vanguard Institutional Developed Market Index Fund 2010 Merged into Developed Market Index Fund Supplement to Prospectus
Vanguard Structured Large Cap Growth Fund 2011 Liquidated Supplement to Prospectus
Vanguard Structured Large Value Fund 2011 Liquidated Supplement to Prospectus
Vanguard Asset Allocation fund 2012 Merged into Balanced Index Fund Supplement to Prospectus
Vanguard Developed Market Index fund 2013 Merged into Tax-Managed International Fund[33] Supplement to the Prospectus and Summary Propsectus
Vanguard Tax-Managed G&I fund 2013 Merged into S&P 500 Index Fund Supplement to the Prospectus and Summary Prospectus
Vanguard Managed Payout Distribution Focus Fund 2013 Merged into Managed Payout Growth and Distribution Fund Supplement to the Prospectus and Summary Prospectus
Vanguard Managed Payout Growth Focus Fund 2013 Merged into Managed Payout Growth and Distribution Fund Supplement to the Prospectus and Summary Prospectus
Vanguard Growth Equity Fund 2013 Merged into Vanguard U.S Growth Fund Supplement to the Prospectus and Summary Prospectus
Vanguard Morgan Growth Fund 2019 Merged into Vanguard U.S Growth Fund Vanguard statement
Vanguard Convertible Securities Fund 2019 Liquidated Vanguard statement

Fund mandate changes

Vanguard occasionally makes mandate changes in a fund's investment objective that radically affects the fund's representation of an asset class. Two such changes in Vanguard sector funds devoted to utilities and gold stocks essentially negated these funds' applicability for defined sector allocation strategies.

In early 2002 shareholders approved a Vanguard proposal to change the mandate of the Vanguard Utilities fund into a Dividend Growth Fund:

As part of the proposals, the fund would no longer invest at least 80% of its assets in common stocks of utility companies. Instead, it would invest in a wide range of companies from various industries. The fund, renamed Vanguard(R) Dividend Growth Fund, would not be permitted to invest more than 25% of its assets in any single industry. Shareholders are also being asked to approve a new investment objective for the fund: to provide above-average income and, secondarily, to provide long-term growth of capital and income.

— 2002 Annual report[34]

Curiously, Vanguard was to create a Utilities ETF in 2004.

In 2004 Vanguard broadened the mandate of the Vanguard Precious Metals fund to include base metal and other materials mining stocks,[35] and subsequently totally changed the mandate of the fund to become the Global Capital Cycles Fund. The moves essentially ended the fund's applicability as an allocation in gold equity.


  1. HAPPY [40th] BIRTHDAY, VANGUARD, forum discussion.
  2. Trust Services: What you should know. The Vanguard National Trust Company was established in 2001.
  3. Vanguard: Who we are
  4. 4.0 4.1 4.2 4.3 4.4 4.5 4.6 2010 Year in Review
  5. 5.0 5.1 "Vanguard: Saga of Heroes" John Bogle, February 27, 2007
  6. The Culture That Gave Rise To The Current Financial Crisis, John C. Bogle
  7. Vanguard: Who we are
  8. Founder to End His Role as Chief At Vanguard, NY Times, May 25, 1995
  9. Vanguard German- Who we are
  10. Our History - Charitable Endowment Program
  11. Vanguard to leave Pershing and self-clear, Investment News, Dec. 30, 2008
  12. Vanguard German- Who we are
  13. Vanguard Launches Canadian Investment Business,June 6, 2011
  14. Vanguard lowers the cost of investing once again October 06, 2010
  15. Vanguard In Massive ETF Rollout
  16. A new way to get fixed annuities through Vanguard October 13, 2010
  17. 17.0 17.1 2014 Year in Review
  18. "Vanguard Brings Unrivaled Access To ETFs". 21 Aug 2018. Retrieved Jan 25, 2019.
  19. "Vanguard Broadens Access To Low-Cost Admiral Shares". 19 Nov 2018. Retrieved Jan 25, 2019.
  20. Fast facts about Vanguard
  21. "Vanguard to Transition Administration of Variable Annuity Offering to Transamerica". Cision PR Newswire. June 19, 2019.
  22. "Vanguard to end its small cash-management service". InvestmentNews. March 4, 2019., Retrieved August 1, 2019.
  23. Bogleheads forum topic: "Vanguard is Discontinuing their VanguardAdvantage Accounts". February 18, 2019
  24. Vanguard Cash Plus Account, Vanguard, retrieved 2023-03-11
  25. Bank Sweep Program Bank List (PDF), retrieved 2023-03-11
  26. Performance report
  27. Morningstar Data Definitions
  28. Fund Family Snapshot
  29. Vanguard Real Estate Fund I 1993 K-10 filing
  30. Vanguard Real Estate Fund II 1995 K-10 filing
  31. The Vanguard Group to Offer Low-Cost, Web-Based Term Life Insurance
  32. Vanguard exits term life business (January 10, 2005)
  33. The Tax-Managed International Fund renamed Vanguard Developed Market Index Fund
  34. 2002 Annual report
  35. 2004 Annual Report

External links

Vanguard Group company annual reports