Vanguard founder Jack Bogle says the world’s second-largest money manager will surpass its rival BlackRock INc. in terms of assets under management.
Bogle criticized BlackRock for what he believes is an over-reliance on exchange traded funds.
"I think Vanguard are betting on a better horse than BlackRock by relying on traditional index funds as well as exchange traded funds rather than simply ETFs,” Bogle told Financial News.
"ETFs are fine as long as you don’t trade them. But they are built for trading and that, generally, is the enemy of investors," said Bogle, the founder of the Vanguard Group.
ETFs account for 28% of BlackRock's $5.7 trillion of assets and make up 18% of Vanguard's $4.4 trillion of investments under management, Financial News reported. Vanguard attracted $215 billion globally in the first six months of this year after collecting a record $323 billion in 2016.
"Vanguard has increased its share of industry assets for about 30 years in a row, and that's going to keep growing, year after year. I used to ask people at our annual staff get-together: ‘Why isn't our market share 100%?’"
Vanguard has forced rivals to cut their fees and spurred others to offer cheaper indexed funds. BlackRock, Fidelity Investments and Charles Schwab Corp. offer similar products today at prices as low and sometimes lower than Vanguard’s.
The vast majority of Vanguard’s assets are in the U.S., but the firm is wagering that lower costs and indexing will become more popular globally over the next decade, Bloomberg reported.
While Vanguard offers actively managed funds -- many of them run by other firms including Wellington Management and Primecap Management -- it hasn’t emphasized stockpicking or promoted star managers. Instead, the company has stressed that over time most investors will do better by investing in low-fee products that aim to match various market benchmarks, such as the S&P 500 index, rather than beat it. That approach helped Vanguard benefit from a general loss of confidence in the financial industry after the 2008 credit crisis.
(Newsmax wires services contributed to this report).
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