Financial Advice for Retirement, Social Security, IRAs and Estate Planning

Vanguard Strays from Its Roots

December 6, 2017

The leading sponsor of index funds is adding to its selection of other management styles. This article explains that Vanguard is offering new ETFs that engage in factor investing and similar practices. These are investing styles that Vanguard’s former leader, John Bogle, criticizes a lot.

What makes the new factor and smart-beta offerings from Vanguard different is that they are actively managed, using a rules-based approach to factors. As of now, about a quarter of Vanguard’s funds are actively managed, but most of its earlier offerings that were factor or smart-beta based were passively tied to an index.

Perhaps it was inevitable that the capital flows into smart beta and factor would attract the company’s attention. Senior management has been debating a more aggressive approach for a while. Chief Executive Officer Bill McNabb hinted at this in our last conversation in 2016, saying the company was “looking carefully at the space.”

 

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