Home Hedge Funds Vanguard CEO Tim Buckley discusses private equity, direct indexing

Vanguard CEO Tim Buckley discusses private equity, direct indexing


At Vanguard Group, there’s a lot going on today that its late founder, Jack Bogle, “would’ve kicked and screamed about,” said Barry Ritholtz, CIO of Ritholtz Wealth Management, during his interview Tuesday of Tim Buckley, Vanguard’s current chairman and CEO.

“ETFs to begin with, he was not a big fan,” Mr. Ritholtz said during the interview at the Exchange: An ETF Experience conference in Miami. He cited the possibility of putting private equity in retirement accounts as another example of something unlikely to have pleased Mr. Bogle.

“He would be furious I would imagine,” Mr. Ritholtz said.

But Mr. Buckley, who started his career at Vanguard during the Bogle era in a position titled chairman’s intern, said Vanguard’s founder was the “visionary behind indexing for the Main Street investor.”

“And so, we want to remember that, but that’s not all he was,” Mr. Buckley said. “He was that vision of ‘how do you put the client first, how do you let (them) keep more of their return.'”

Private equity is “not an easy game,” the Vanguard CEO said.

“First, the average return is typically a little bit below the S&P, and there’s a wide dispersion of returns,” Mr. Buckley said. “So, if we’re going into that, how do we make sure that our clients are on the right side of that distribution.”

Mr. Ritholtz also asked about direct indexing, another thing he said Mr. Bogle would not have loved.

“This is a big new push you guys are doing, tell us a little bit about that,” Mr. Ritholtz said.

Vanguard looked at direct indexing years ago and started thinking about it, Mr. Buckley said.

“What’s a way that you could disrupt the ETF or the mutual fund,” the CEO said. “You always should be looking is there a better way to do it.”

Direct indexing has existed for a while, but it was reserved for the “ultra, ultra, high-net-worth,” Mr. Buckley said.

“And we can see that … there’s huge tax benefits for a lot of investors in using direct indexing,” the CEO said, adding that the idea of creating portfolios that don’t undermine people’s retirement but let them invest in line with their values was something Vanguard found interesting.

Rather than hoping direct indexing would go way, Vanguard decided to embrace it and “see if it is a better way to do something,” Mr. Buckley said.

“And we’ll find out over time,” the CEO said. “But we’ll be investing heavily.”

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