Vanguard

Vanguard Overview: The Vanguard Group is headquartered in Valley Forge, PA and is effectively owned by the investors in its mutual funds. Its main lines of business include:

  • Mutual Funds
  • Discount Brokerage
  • Retirement Services

Size: Vanguard reported these figures are as of May, 2008:

  • Employees = 12,000
  • Domestic Mutual Funds = 150
  • Mutual Fund Assets Under Management = $1,300 billion
  • Offices (worldwide) = 11
  • Offices (U.S.) = 3

Positives: Vanguard is a highly-respected industry leader, especially noteworthy for its longstanding commitment to efficiency and cost control. Uniquely, it is not only a mutual fund company, but also one organized as a mutual company, like a mutual insurance company or a mutual savings bank (both of the latter, it should be noted, are declining in numbers, with a wave of recent conversions to publicly-traded corporations). It is supposed to be managed for the sole benefit of the investors in its funds, hence its focus on reducing costs and thereby increasing investors’ returns. (Mutual insurance companies return most profits to policyholders in the form of annual “dividend” checks, while mutual savings banks, like their close kin, credit unions, reduce retained profits by maximizing the rates offered to depositors.) Vanguard is probably the premier place in the financial services industry to learn aggressive cost management.

Negatives: Its focus on cost control is reflected in its lean staffing relative to its assets under management ($108 billion per employee), as compared to rivals Fidelity ($33 billion) and T. Rowe Price ($73 billion), for example. The numbers may be skewed somewhat by the massive index funds that are flagship products at Vanguard. Nonetheless, the efficiencies achieved by Vanguard may suggest heavier average staff workloads and/or lower pay scales than at competitors. The financial data that Vanguard and its major competitors release publicly is not robust enough to make definitive determinations on this matter, however.

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