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Beware of the Institutional Imperative

Vanguard's culture remains strong, but it can't get complacent.

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Vanguard looks unstoppable. Perhaps it's time to start worrying.

That may seem incongruous to anyone who's paid attention to the $1.4 trillion mutual fund family. Indeed, Vanguard has emerged even stronger from a decade of market turmoil and scandal. As investors burned by other firms have gotten religion about the kind of cheap, index-tracking strategies that are Vanguard's specialty, it has amassed assets. It has been one of the top-two selling fund families in most calendar years since 1993 and has finished seven of the past 10 years as the largest mutual fund complex in the world--a title it still held at the end of November 2010. It also is gaining market share in exchange-traded funds and expanding overseas.

It has been a long time since Vanguard was the iconoclastic upstart sticking its finger in the eye of the money-management industry with "Bogle's Folly"--as some derided Vanguard 500 Index when it launched in 1976. Rather, Vanguard is now a large part of "the Establishment," and that affects its culture. Here, I'll check that culture's vitals.

Dan Culloton does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.