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Jack Bogle remembered as more consequential to savers than Buffett

Jack Bogle has been remembered as an investor who has had a larger impact on everyday savers than his arguably more well-known counterpart Warren Buffett as Vanguard confirms the death of the founding father of index investing.

Bogle (pictured) passed away in Pennsylvania on Wednesday aged 89, four months short of his 90th birthday. He was the founder of Vanguard, which is today a $4.9trn asset manager, and launched the first index fund in 1976.

In a press release, Vanguard said he had gained legendary status in the American investment community, but the UK investment industry said his influence had been global.

While billionaire Berkshire Hathaway founder Warren Buffett is more of a household name, Morningstar CIO Dan Kemp said Bogle had had more of an impact on everyday savers both due to the assets represented in Vanguard compared to Berkshire Hathaway and through the pressure Vanguard has placed on rival managers’ fees.

Bloomberg article from 2016 suggested Vanguard had saved investors $1trn in charges.

“Buffett has been a great teacher to us all but he has only directly helped the shareholders of Berkshire Hathaway,” said Kemp. “But we know that Vanguard is an enormous investment operation – there are far more people saving through Vanguard than Berkshire. I think Warren would agree that Bogle’s had more impact.”

The ‘un-American’ index fund

Today index funds account for more than 70% of Vanguard’s $4.9trn assets under management but the concept was ridiculed as “un-American and “a sure path to mediocrity” when Bogle launched the First Index Investment Trust in 1976.

It attracted just $11m during its initial underwriting but today, rebranded as the Vanguard 500 Index fund, it is one of the world’s largest mutual funds holding $441bn.

Vanguard said Bogle stood behind the concept in the face of sceptics until it gained widespread acceptance. “Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their children’s futures,” said chief executive Tim Buckley in the press statement.

Pressure on active funds

Bogle’s influence was not limited to lowering the cost of investments via passive funds, Orbis Investments director Dan Brocklebank told Portfolio Adviser.

“Less frequently discussed is the role passive investing has played in forcing active managers to improve, namely to be more accountable and offer better value for money. There’s plenty still to do here but he set that process in motion.”

When Vanguard was founded in May 1975, Bogle introduced mutual funds that operated at cost and independently with their own directors, officers and staff, in contrast to the prevailing model of a fund house running a fund’s affairs on a for-profit basis.

In 1977, Vanguard ceased to market funds through brokers and instead offered them directly to investors, eliminating sales charges.

Common sense investing

Bogle’s common-sense approach to investing chimed with ordinary investors, said Hargreaves Lansdown senior analyst Laith Khalaf.

“A lot of it is about lowering costs as you would expect, part of that is investing passively, and part of it is just having a sensible allocation to both equities and bonds. It’s not about fancy black-box algorithmic trading, it’s the opposite end of the spectrum.”

The Little Book of Common Sense Investing, published in 2007, was one of Bogle’s most successful books with his first published in 1993 and his last, Stay the Course: The Story of Vanguard and the Index Revolution, published just last year. Bogle wrote 12 books, selling over a million copies worldwide.

Kemp, who describes Bogle as a hero of his, says The Little Book of Common Sense Investing was his favourite book by the investor due to its focus on the power of long-term investing. “He appreciated that investing was a long-term activity and people who are investing should be less concerned about what is happening day-by-day and all of the noise that surrounds them, which is particularly relevant as we think about politics and Brexit and all those things.”

Bogle’s career

Bogle started his career at the Wellington Management in 1951 after graduating magna cum laude in economics from Princeton University, where he had written his senior thesis on mutual funds.

By 1967 he was president of the asset manager and that year led a merger with investment firm Thorndike, Doran, Paine & Lewis (TDPL).

Following a management dispute with the principals of TDPL, Bogle left to form Vanguard, which officially launched in May 1975.

In January 1996, Bogle passed the reins of Vanguard to his hand-picked successor, John J Brennan, who joined the company in 1982 as his assistant.

In December 1999, he stepped down from the Vanguard board of directors. However, he remained active in the investment industry and was president of the Bogle Financial Markets Resource Center, where he highlighted issues affecting the financial markets, mutual funds, and investors through books, articles, and public speeches until his death.

As recently as November 2018, he penned an opinion piece for the Wall Street Journal raising concerns about the concentration of ownership of the US stock market among passive fund giants like Vanguard, Blackrock and State Street Global.

He married Eve Sherrerd in 1956. They had six children, 12 grandchildren and six great-grandchildren.

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Jessica Tasman-Jones

Jessica Tasman-Jones is news editor at Portfolio Adviser and covers fund selection, asset allocation and portfolio construction for intermediaries, as well as industry news and regulation. Previously she...

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