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Rekenthaler Report

The Vanguard Anomaly

The fund industry's leader remains an outsider.

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Capitalist Pigs
The nation's (and world's) largest and most praised fund company is run as a nonprofit. I speak, of course, of Vanguard, founded by Jack Bogle as a nonprofit organization to be owned by its funds' shareholders. In his latest speech, "Big Money in Boston: The Commercialization of the 'Mutual' Fund Industry," Bogle sounds a familiar theme in lambasting fund companies that are run for commercial reward.

Effectively, Bogle argues that fund companies play a zero-sum game. They can give more to owners of their funds, or they can give more to owners of the fund companies, but they cannot give more to both. They cannot use their profits to do what profits normally enable, that is hire better people, purchase better equipment, and invest in better research so as to make better products and deliver better service. Instead, profits are monies funneled from fund shareholders to the owners of fund companies.

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.