Greg Davis, head of Fixed Income, named chief investment officer.
Vanguard announced that chief investment officer Tim Buckley will succeed Bill McNabb as CEO on Jan. 1, 2018. Today the firm's board elected Buckley, 48, as president and director of The Vanguard Group. McNabb, 60, will remain as chairman of the board.
Greg Davis, global head of Vanguard's Fixed Income Group, replaces Buckley as CIO. John Hollyer, who has led Vanguard's Risk Management Group since 2003, replaces Davis as the head of fixed income.
Buckley is well prepared to lead Vanguard. After McNabb, he is the longest-serving member of the senior leadership team, having joined in 2001. He has also run three major departments, first as chief information officer from 2001 to 2006, then as head of the Retail Investor Group from 2006 to 2012, and finally as chief investment officer since 2013.
Buckley's experience as CIO and head of Vanguard's Information Technology Division may be most relevant in his new role. During McNabb's tenure, Vanguard has invested heavily in technology and the firm employs about 3,000 software developers.
As McNabb has said, technology is Vanguard's primary source of scale and it has helped assets under management grow to $4.4 trillion, as of June 2017, without adding tremendously to head count. But technology also requires constant reinvestment and it's telling that the board chose someone with IT management experience to lead the firm.
Buckley will likely continue to invest heavily in IT-related areas such as automated advice through Vanguard's Personal Advisor Service, which is run by Karin Risi, as well as in cybersecurity. One challenge Buckley faces is improving customer service. Assets have grown so rapidly over the past decade that client servicing has struggled at times to keep up. Buckley will need to find ways to improve service without adding significant cost.
It's also not surprising that Vanguard chose an insider as its next CEO. Under McNabb and others, Vanguard has worked hard to develop its next generation of leaders. Buckley and Davis--along with other leaders such as Chris McIsaac, Martha King, and Risi--are the payoff for their efforts. Buckley himself is deeply steeped in Vanguard's culture. He began his career there in 1991 as an assistant to founder Jack Bogle, tying him directly to Vanguard's origins.
As for McNabb, his tenure has been a monumental success by almost any measure. Vanguard's AUM have nearly quadrupled from $1.25 trillion in 2008 when he became CEO. He began his tenure in the middle of the credit crisis, guiding the firm through one of the most difficult market environments ever.
Since then, Vanguard has come to dominate the investment industry, claiming an estimated 23.4% of the combined mutual fund and exchange-traded fund market. Low-cost funds, led by Vanguard's index lineup, have dominated fund flows during his tenure and show no signs of letting up. Meanwhile, he has continued to develop Vanguard's management talent and oversaw its entry into automated advice through the launch of Personal Advisor Service.
Buckley will inherit a very different firm and landscape from the one McNabb inherited. His challenge will be to maintain and extend Vanguard's dominance, while trying to keep existing clients happy. Vanguard will continue to be a low-cost leader, but Buckley certainly knows that it will take far more than that for the firm to keep its leadership position over the next decade.