Vanguard’s history (2024)

1975–1976 Setting the foundation

1975: Vanguard commences operations under a unique investor-owned structure

When founding Vanguard, John C. Bogle sought to create a new and better way to manage a mutual fund company. The result was an enterprise based on a simple but revolutionary idea: investor ownership. Vanguard is owned by the funds that, in turn, are owned by the funds’ shareholders. In short, it’s a company owned by the investor and for the investor.

Vanguard founder John C. Bogle discusses what has made Vanguard different from the very beginning

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What made Vanguard different from everybody else in this industry was the structure that I picked in the first place, way back in 1974.

There's an old saying, “Treat your customer like an owner,” which is easy for us to do, because our clients are our owners. The Vanguard shareholders actually own Vanguard.

We offer you a company that has a good sense of values, places a high degree of importance on integrity, and believes the key to success in this business is service to others.

People are the key to everything we do and everything we ever have done. I've often talked about human beings being the hallmark of this operation; people that care about our values, people that care about our integrity. Each with their own hopes and fears and financial goals.

Welcome to Vanguard.

John C. Bogle

Vanguard's founder

John C. Bogle's handwritten notes laying out options for Vanguard’s corporate structure.

1975:Vanguard introduces its first money market fund

Vanguard opened a new asset class to investors with its first money market fund, affording them the opportunity to earn higher yields than bank savings vehicles provided and to park money in a convenient cash management account. By 1981, money market fund assets represented 36% of Vanguard’s total assets under management, and Vanguard Prime Money Market Fund (now Vanguard Cash Reserves Federal Money Market Fund) was the category’s largest fund, with $1.2 billion in assets.

1976:Vanguard democratizes the institutional strategy of indexing

Vanguard pioneered the concept of mutual fund indexing with the introduction of the First Index Investment Trust (now Vanguard 500 Index Fund). The index strategy, previously available only to pension funds and other institutional investors, brought low costs and broad diversification to individual investors.

A share certificate for First Index Investment Trust, the first index fund available to individual investors.

1977–1985 Expanding offerings and capabilities

1977: Vanguard lowers the cost of investing by going no-load

Vanguard was the first fund group of its size to convert to no-load distribution, meaning that there would be no sales charges on purchases of Vanguard funds. By bypassing the traditional broker-dealer network, Vanguard considerably lowered the cost of investing.

1977:Vanguard supplements bond offerings with municipal funds

A new series of municipal bond funds offered investors three portfolios with different target maturities: short-term, intermediate-term, and long-term. The three-tiered series represented an industry first and provided tax-conscious investors the opportunity to assemble a diversified, laddered portfolio.

1981: Vanguard develops in-house active investment management function

Having previously relied only on external advisory firms to manage active fund assets, Vanguard developed internal investment management capabilities by creating the Fixed Income Group (FIG) to oversee money market and municipal bond products. In-house equity and bond investment professionals are now responsible for $4 of every $5 invested in the Vanguard funds (source: Vanguard).

The Fixed Income Group team in charge of managing the Money Market Trust, 1981.

1981:Vanguard focuses on serving retirement-minded investors

Vanguard Fiduciary Trust Company was founded, enabling Vanguard to serve as trustee and custodian for individual retirement accounts (IRAs). Along with IRAs, the advent of 401(k) plans during this period benefited investors of modest means and helped them save for retirement.

1983: Vanguard offers brokerage services

To enable clients to complement their mutual fund holdings with individual stocks and bonds, Vanguard introduced a brokerage service that offered savings of up to 70% on stock trading commissions.

1985: Vanguard puts investors first by closing two top-performing funds

Prompted by strong cash flow into the Windsor and Explorer Funds, Vanguard suspended the offering of shares to new investors and limited sales to existing shareholders. The firm sought to safeguard investor interests by curtailing the funds’ asset growth, thereby helping to preserve the investment advisors’ ability to produce competitive long-term results. In subsequent years, Vanguard demonstrated its client-first culture by closing other popular funds.

John J. Brennan reflects on how Vanguard’s growth is driven by our mission

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When I look forward from there, or backwards to there, you say what’s arguably most impressive in my view is that the company could have been satisfied, and the company wasn’t satisfied. The company said, there’s more we can do. There’s more investors we can serve. We can be higher-value for those investors. And instead of being complacent, really, we made complacency a very visible threat.

And it’s extraordinary, I think, in many ways to see how the people of the company adopted that point of view and said, let’s go be better, and better tomorrow, and better the next day. And that’s the most exciting part of that inflection point, if you will, back then.

There’s no question that as the company has expanded, the mission has driven all that we do. Nothing happens at Vanguard which isn’t in the investors’ interest. It was never conceived that we’d have a brokerage business when Vanguard was established, but it’s a great complement. It was never conceived we’d have millions of people on our recordkeeping system when Vanguard was first established, but it’s a great part of who Vanguard is today, and the stories go on and on and on.

But when you look at the decisions that get made at Vanguard, they always hew back to the mission of being the best financial provider in the world. And I hope there’s tons more—10 and 20 and 100 years from now—that Vanguard does, but never losing sight of the client’s interests and being the best in every endeavor that we undertake.

John J. Brennan

Vanguard CEO 1996–2008

1996–2000 Exporting the Vanguard way of investing

1996: Vanguard expands internationally by opening an office in Australia

Vanguard Investments Australia opened for business in Melbourne, marking the firm’s first foray outside the United States. Over the next two decades, Vanguard would expand its global footprint to include multiple European countries, Canada, Mexico, and China.

1996: Vanguard rolls out its first advice services

To help individual investors improve their outcomes, Vanguard began offering investment advisory and financial planning services with affordable fee structures that set a new industry standard for value.

2000: Vanguard introduces its first social index fund

Recognizing that some investors want their portfolios to reflect their beliefs and values, Vanguard introduced Vanguard Calvert Social Index Fund (now Vanguard FTSE Social Index Fund), which seeks to track the performance of large- and mid-capitalization U.S. stocks screened for certain environmental, social, and governance (ESG) criteria. Vanguard currently offers both indexed and actively managed ESG options in the U.S., Australia, and Europe.

Vanguard launched our first socially responsible fund to address the preferences of socially conscious investors.

2000: Vanguard offers cost savings to long-time and loyal clients

Vanguard introduced Admiral™ Sharesto reward its largest and longest-term retail shareholders. Recognizing the cost efficiency of large and long-tenured accounts, Admiral Shares featured expense ratios 5 to 7 basis points lower than the already low-cost Investor Shares.

2001–2014 Widening the availability of indexing

2001: Vanguard brings cost competition to the ETF market

Vanguard began offering ETFs as exchange-traded shares of Vanguard index funds—a unique and patented approach that leveraged the size and scale of existing index funds to bring lower-cost entries to the ETF market. The first one available was Vanguard Total Stock Market ETF, which began trading on the American Stock Exchange.

When we entered the ETF market in 2001, our unique approach lowered costs for investors.

2002: Vanguard partners with Nevada to offer a 529 plan

For investors seeking a low-cost college savings program, Vanguard partnered with the state of Nevada to develop a 529 College Savings Plan offering 21 investment options, including age-based portfolios. Today, Vanguard is a leading provider of 529 plans available to investors in all 50 states.

2003: Vanguard launches dynamic single-fund portfolios

Vanguard launched Target Retirement Funds, highly diversified, all-in-one portfolios that shift allocations over time by becoming more conservative as the investor’s retirement nears. As of the end of 2021, Vanguard is now the largest target-date fund manager in the industry. Four out of five participants in 401(k) plans recordkept at the firm are invested in a target-date fund (sources: Morningstar and Vanguard).

2006: Vanguard crosses the $1 trillion asset milestone

Buoyed by strengthening financial markets and robust cash flows, Vanguard assets under management surpassed $1 trillion.

2008: Vanguard announces a new CEO

F. William McNabb III was named Vanguard CEO, succeeding John J. Brennan. A 22-year Vanguard veteran, Mr. McNabb previously held senior leadership positions in Vanguard’s Retail and Institutional Investor Groups.

Bill McNabb discusses how taking care of our investors has made Vanguard a stronger company

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First of all, timing is everything, and my predecessor Jack Brennan likes to say I’m the worst market-timer in history. I like to say he’s the best market-timer in history. But in all seriousness, when the [financial] crisis began to really unfold, we had—I was new to the role and the team was—we were still working through that transition. But in a lot of ways, I think it solidified us as a team, because we had to work in a different way than the senior team had ever had to work before.

We were in crisis mode for essentially nine months. And the collaboration and the bonds that were forged during that period are something I’m going to remember for my whole life. And I actually think it led to us being stronger, both as a team, and that eventually translated into us being stronger as a company.

I think anytime you go through a crisis—and 2008 was certainly the most significant crisis we’ve gone through—organizations have an opportunity to rise or fall. And what Vanguard did was step up on behalf of clients. Frankly, we stepped up on behalf of the crew as well, and we emerged from the crisis actually a much stronger company.

One of the things that went on as a result of the crisis is once we had navigated the immediate situation, we actually stepped back and said, with all of the things that we now know, and the then coming regulation, and so forth, how’s the world going to be different? And what do we need to do as an organization to be different?

So in a lot of ways, we were able to take all of the change that was occurring because of the crisis, and actually reshape and refocus our energies, so that we were a stronger company. We’re here to take a stand for investors, treat them fairly, and ensure that they have the best chance for success. I think that’s actually the most succinct way of describing what we are. But if you think about it, our structure really determined an awful lot for us.

And the fact that the funds own Vanguard, and the investors in the funds, therefore, through the funds own Vanguard, has driven everything that we’ve done. Jack Bogle once gave a famous speech where he said strategy follows structure. I actually think that’s correct.

We’re owned by the funds, and therefore, the investors in the funds own Vanguard. We’re the only investment firm in the world that’s structured this way. That client-centricity drives everything. One could argue, everything we’ve done strategically is because of that structure. And if you think about the decisions we make, it’s always what’s in the best interest of our client-owners. And that’s really a result of our structure.

So, when I look back on the last 40 years, every key decision we’ve made has really been centered around the fact that we’re owned by the investors, as opposed to a publicly traded company—the way a publicly traded company is owned, or a private partnership, or whatever.

And that client ownership structure is the single most distinguishing characteristic of Vanguard. You can never take your eye off what’s the heart and soul of this company, which is making sure that we’re there for the investor.

F. William McNabb III

Vanguard CEO 2008–2017

2011: Vanguard forms a division dedicated to serving financial intermediaries

To better serve the growing number of financial advisors and broker-dealers adopting Vanguard ETFs, Vanguard spun off a separate division to provide products, services, and education to more than 1,000 firms. Financial Advisor Services is today the firm’s largest client-serving group measured by assets under management, with nearly $3 trillion in AUM as of February 28, 2023.

2012: Vanguard delivers cost savings and cost certainty with sweeping benchmark changes

Vanguard transitioned six international stock index funds to FTSE Russell benchmarks and 16 U.S. stock and balanced index funds to new benchmarks developed by the University of Chicago’s Center for Research in Security Prices (CRSP). Long-term agreements with FTSE and CRSP secured benchmarks that met Vanguard’s world-class standards, lowered licensing costs for the funds, and provided “cost certainty” into the future.

2015–2022 Making advice more accessible

2015: Vanguard makes advice more accessible and affordable

Vanguard unveiled Personal Advisor Services, which combined an ongoing relationship with a licensed advisor, a user-friendly online experience, and sophisticated investment modeling technology. The service became broadly available to individual investors with at least $50,000 in Vanguard investments to be managed at an asset-based fee of 0.30%.

A 2016 promotional video campaign for Personal Advisor Services featured client stories.

2015: Vanguard brings to market its first actively managed ETFs

Vanguard launched new factor-based ETFs in the U.K., representing the firm’s first actively managed ETFs and extending its traditionally managed active fund lineup. One year later, Vanguard brought its factor ETFs to Canada, and, in 2018, it introduced them in the U.S.

2018: Vanguard drives down the cost of ETF investing

Long known for its low-expense ETFs, Vanguard further lowered the cost of investing by providing Vanguard Brokerage Services clients with commission-free trading for the vast majority of our ETFs.¹ The elimination of commissions resulted in considerable savings for clients and was widely hailed as another investor-friendly initiative. The firm extended commission-free online trading to stocks and options two years later.²

2018: Vanguard welcomes a new leader

Mortimer J. (Tim) Buckley assumed the CEO position, succeeding Bill McNabb. Mr. Buckley joined Vanguard in 1991 and held a number of senior leadership positions, including chief information officer (2001‒2006), head of the Retail Investor Group (2006‒2012), and chief investment officer (2012‒2018).

Tim Buckley shares lessons learned from his predecessors and his vision for Vanguard’s future

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As we enter 2018, I’m absolutely thrilled to take the helm of Vanguard. I get the chance to lead and support a crew I care deeply about, on a mission I firmly believe in. And I’m lucky. I’m surrounded by a top-notch senior leadership team. And I’ve been fortunate through the years to have been mentored by some fabulous leaders.

I’ve had the chance to work with our three legendary CEOs. And people always ask me, what did you learn from them? From Jack Bogle, I learned our founding principles. From Jack Brennan, I learned the importance of strategic differentiation, and that we can all inspire each other to hit levels we never thought possible. Bill McNabb, what we all learned from him, the importance of collaboration. And he showed us how to build highly effective teams.

We’ll continue to follow those principles, to operate that way as we go into the future. And I’m proud to be part of the Vanguard crew, to be part of that team. When I look out, I see 17,000 crew putting the client first, each and every day. And you do so on a noble mission. Every day, we look to help people retire better, put their kids through college. We look to give them financial peace of mind. We have a bright, bright future ahead, and we have a lot more to do for our clients.

Mortimer J. Buckley

Vanguard CEO 2018–present

2018: Vanguard reaches the $5 trillion asset mark

A long bull market and continued client loyalty propelled Vanguard’s assets past $5 trillion.

2020: Vanguard inaugurates Digital Advisor

Vanguard broadened its advice offerings for individual investors by unveiling an all-digital financial planning and money management service. Digital Advisor delivers unmatched convenience, simplicity, affordability, and functionality to investors seeking a personalized investment plan and ongoing guidance.

Digital Advisor Services rolled out, 2020.

2020: Vanguard reimagines the 401(k) business

Vanguard engaged Infosys as part of its ongoing strategy to enhance and continually improve its full-service defined contribution business. The relationship combined a cloud-based recordkeeping platform with Vanguard’s investment and advice capabilities to fundamentally reshape the corporate retirement plan experience for plan sponsors and participants.

2021: Vanguard’s first-ever acquisition of Just Invest

The acquisition adds direct indexing, or personalized indexing, capabilities to bolster Vanguard’s world-class investment product lineup and service offering for advisors.

2022: Extending our investment philosophy to the world

Today, Vanguard continues to expand, bringing the benefits of Vanguard investments and advice to new markets while staying true to our core purpose by giving investors around the world the best chance for investment success.

2022: Formalizing our commitment to DEI

Vanguard became a founding member of the World Economic Forum's Global Parity Alliance, a cross-industry group of companies committed to advancing DEI in the workplace and beyond.

As an expert in investment management and the history of Vanguard, I'll delve into the concepts highlighted in the provided article regarding the establishment and growth of Vanguard from 1975 to 2022.

Vanguard's Evolution and Key Milestones:

1975-1976: Setting the Foundation

Investor Ownership Structure: Vanguard was founded by John C. Bogle with a unique investor-owned structure, where the funds themselves are owned by shareholders. This groundbreaking approach ensured that Vanguard is owned by its investors, establishing a client-centric model.
Money Market Fund Introduction: Vanguard introduced its first money market fund, providing investors an alternative to traditional savings vehicles and offering higher yields for cash management.
Pioneering Mutual Fund Indexing: The launch of the First Index Investment Trust (now Vanguard 500 Index Fund) marked Vanguard's democratization of indexing for individual investors, previously only accessible to institutional investors.

1977-1985: Expanding Offerings and Capabilities

No-Load Distribution and Municipal Funds: Vanguard transitioned to a no-load distribution model, eliminating sales charges on fund purchases. It also introduced a series of municipal bond funds with varying target maturities.
In-house Investment Management: Development of internal investment management capabilities through the creation of the Fixed Income Group (FIG) to oversee various fund types, reducing reliance on external advisory firms.
Focus on Retirement Services: Vanguard Fiduciary Trust Company was established to serve retirement-minded investors, facilitating IRA and 401(k) plans.
Brokerage Services and Fund Management: Vanguard expanded its services to include brokerage, enabling clients to invest in individual stocks and bonds. It also proactively managed fund growth by closing top-performing funds to new investors, prioritizing existing shareholders' interests.

1986-1995: Sowing the Seeds of Indexing Leadership

Expansion of Index Fund Offerings: Vanguard expanded its index fund offerings, introducing various funds tracking different indices, solidifying its position as a leader in the indexing space.
Infrastructure Expansion: Vanguard initiated the construction of new corporate headquarters, expanding its presence across different states, including Pennsylvania, Arizona, North Carolina, Washington D.C., Texas, and California.
Pioneering Online Presence: Vanguard's online presence started with the Vanguard Online site (precursor to vanguard.com) on AOL, providing clients with digital interactions beyond traditional means.

1996-2000: Exporting the Vanguard Way of Investing

International Expansion: Vanguard expanded globally by opening its first office in Australia, later expanding to multiple European countries, Canada, Mexico, and China.
Introduction of Social Index Fund: Recognizing investor preferences for socially responsible investments, Vanguard introduced the Vanguard Calvert Social Index Fund (now Vanguard FTSE Social Index Fund), aligning with specific environmental, social, and governance (ESG) criteria.
Admiral Shares and ETF Entry: Vanguard introduced Admiral Shares with lower expense ratios for long-term shareholders and entered the ETF market, offering lower-cost entries and expanding its investment options.

2001-2014: Widening the Availability of Indexing

Entry into ETF Market: Vanguard entered the ETF market, providing exchange-traded shares of its index funds, bringing cost competition and further lowering costs for investors.
529 Plans and Target Retirement Funds: Vanguard partnered with Nevada to offer a 529 College Savings Plan and launched Target Retirement Funds, diversified portfolios adjusting allocations based on investors' proximity to retirement.
CEO Succession and Benchmark Changes: Leadership transitions occurred with F. William McNabb III taking over as CEO. Additionally, Vanguard transitioned several funds to new benchmarks, securing cost-efficient and reliable benchmarks for its funds.

2015-2022: Making Advice More Accessible

Personal Advisor Services and Actively Managed ETFs: Vanguard introduced Personal Advisor Services, combining advisor relationships with technology for investors. It also ventured into actively managed ETFs, offering factor-based investment options.
Digital Advisor and DEI Commitment: The introduction of Digital Advisor provided an all-digital financial planning service. Vanguard also expanded its commitment to diversity, equity, and inclusion (DEI) by joining the Global Parity Alliance.
Strategic Acquisitions and Continued Expansion: Vanguard's acquisition of Just Invest added personalized indexing capabilities. The company continued its global expansion, extending its investment philosophy to new markets while upholding its commitment to investor success.

These milestones illustrate Vanguard's commitment to innovation, investor-centricity, global expansion, and continuous evolution within the investment management industry.