To: Veterans and Principals
From: John C. Bogle
Date: June 11, 2015
RE: Vanguard in the News
(1) I’m delighted to start this list of news stories with a splendid full-page essay in the Financial Times on May 27, 2015; Investment: Vanguard’s Commanding Position, by Stephen Foley. You’ll be familiar with many of the events he describes but perhaps less so with the history of the nautical theme that is not only featured, but described at length. NOTE: The online version of the Financial Times article was accompanied by a wonderful video focused on our nautical heritage. It’s short and worth watching. Click here to view the video.
(2) John Rekenthaler’s Morningstar essay, Jack Bogle’s Great Insight, June 11, 2015. In our interview, John quickly picked up on one of Vanguard’s founding pillars! Offering funds with relative predictability, designed to parallel the competitive peer groups, avoiding the performance saving that provide elation to investors and then disappointment (as cash pours out). The idea: to help investors avoid the behavioral problems so often engendered by moving from one fund to another.
John cites our Vanguard Total Stock Market Index Fund as the classic example of relative predictability (now known as high R2, measured by fund returns relative to its comparable index(es) or peers). Of course that’s true. But he fails to mention the high R2s of most of our actively managed funds . . . Wellington 0.97, Wellesley 0.96, Morgan 0.98, Strategic Equity 0.98, Windsor II 0.97, Windsor 0.95, even PRIMECAP 0.93 and Health Care 0.92. Our major municipal bond funds came in at 0.98 and 0.97. This is no accident, merely the result of a multi-manager strategy and (to a lesser extent) the right portfolio standards we demand of many of our active managers.
(3) Why Bogle and Buffett tell investors to ignore market noise, Market Watch, June 4, 2015, by Mitch Tuchman. You all know this consistent message; the photos are sort of clever.
(4) Vanguard ties help Wellington buck weak trend in active funds, Reuters, May 29, 2015, by Ross Kerber. Wellington Fund has for many years been a successful performer for its fund shareholders—and even better for Wellington Management Company. See final paragraph, which raised some provocative questions.
(5) Low cost is just the first step in picking funds: Bogle. A lengthy interview with me by Elizabeth MacBride, posted on CNBC’s website on May 26, 2015. Lots of interesting insights, plus the (obligatory?) “five rules” for selecting an actively managed fund.
NOTE: Interesting Item of the Week. In my last mailing, I suggested that the photo of me in the casino must have been photo shopped. It was! As one veteran crew member informed me, the image was from a promotional piece for the film “Casino,” with my face replacing that of its star, Robert deNiro.
The beat goes on. Enjoy!
Jack