US investment company Vanguard announced on Thursday that its founder, John ‘Jack’ Bogle, has died at the age of 89.
In a lengthy statement, Vanguard described Bogle as having “legendary status in the American investment community, largely because of two towering achievements”.
“He introduced the first index mutual fund for investors and, in the face of sceptics, stood behind the concept until it gained widespread acceptance; and he drove down costs across the mutual fund industry by ceaselessly campaigning in the interests of investors,” it said.
Buffett seal of approval
In 2017, famous investor Warren Buffett lavished praise on his “hero” in his annual letter to shareholders.
“If a statue is ever erected to honour a person who has done the most for American investors, the hands down choice should be Jack Bogle,” the Berkshire Hathaway founder told investors.
“For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of added value.
“In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realise far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.”
Experimenting his way to success
Bogle started his career in 1951 after graduating magna cum laude (with great distinction) in economics from Princeton University. His senior thesis was on mutual funds.
In September 1974, Bogle set up Vanguard to handle the administrative functions of his then-employer Wellington Management Company.
This formed the basis of what became The Vanguard Experiment.
“Our challenge at the time,” Bogle later recalled, “was to build, out of the ashes of major corporate conflict, a new and better way of running a mutual fund complex. The Vanguard Experiment was designed to prove that mutual funds could operate independently, and do so in a manner that would directly benefit their shareholders.”
In 1976, Vanguard introduced the first index mutual fund — First Index Investment Trust — for individual investors.
It was ridiculed by others in the industry as “un-American” and “a sure path to mediocrity”, collecting a mere $11m (£8.6m, €9.6m) during its initial underwriting.
Now known as Vanguard 500 Index Fund, it has grown to be one of the industry’s largest, with more than $441bn in assets. Its sister fund, Vanguard Institutional Index Fund, has $221.5bn in assets.
Index funds currently account for more than 70% of Vanguard’s $4.9trn in assets under management; they are offered by many other fund companies as well and they make up most exchange-traded funds (ETFs).
For his pioneering of the index concept for individual investors, Bogle was often called the “father of indexing”.
Bogle passed the reins of Vanguard to his successor, John Brennan, in January 1996. Brennan was hand-picked by Bogle having joined the company in 1982 as his assistant.
In December 1999, Bogle stepped down from the Vanguard board of directors but remained connected to the business through Bogle Financial Markets Resource Centre, of which he was president.
