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Investing Specialists

A Chat with Vanguard's New Chairman

Bill McNabb, the firm's third chairman, on fees, markets, and what scares him.

Shortly after Bill McNabb took over as Vanguard CEO from Jack Brennan in late 2008, the global financial system faced Armageddon. By the start of this year, the end was no longer nigh, and Vanguard had once again emerged from a crisis not only as a survivor but, arguably, as a big winner. Investors have flooded the family with money, and its funds, by and large, have held up well. I recently spoke with McNabb, who recently also took over as Vanguard chairman, about his still-short tenure, what may lie ahead for the world's largest mutual fund family, and investing in general. An edited transcript of our conversation follows.

Q. In terms of asset growth and fund flows, it has been a strong decade for Vanguard. What can trip up Vanguard going forward?

A. I think for any company in our business, ultimately, reputation is vital. It's a business built on trust, for us, arguably, more so than anyone else. The unique ownership structure we have, the way we do business--all really are built upon a tremendous implicit trust between our investors and us. Anything we could do to violate that trust would put us in a very precarious situation.