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July 14, 2017 at 10:09 AM
Vanguard made headlines Thursday by announcing that CEO Bill McNabb is stepping down and passing the baton to Chief Investment Officer Tim Buckley on Jan. 1. McNabb will remain chairman.
While analysts say that this transition won’t result in much change, there are other issues going on at the world’s largest fund group — which has about $4.4 trillion in client assets.
On the same day it shared the news of McNabb’s retirement, Vanguard also filed a preliminary proxy statement with the Securities and Exchange Commission seeking shareholder election of a board of trustees for all of its funds and approval of several fund-policy changes.
“We encourage Vanguard fund shareholders to vote on these important proposals, which will put in place the people and policies to enable us to continue to lower the cost of investing and enhance the management of our funds with the ultimate goal of improving client outcomes,” McNabb explained in a statement.
The fund family is expected to make “a fairly seamless transition from McNabb to Buckley,” said Kevin McDevitt, Morningstar’s lead analyst on Vanguard funds, in an interview posted on the research firm’s website Thursday.
“But also, I think, Buckley’s experience is well suited to where the firm is going. One of the big emphases for Vanguard has been technology,” McDevitt added. “Just investing heavily in technology, that’s how the firm has scaled so remarkably under McNabb’s tenure. I think that Buckley is well suited to continue that.
As to the fund changes, McDevitt agrees with the shifts — the most important of which allow fund managers to work with external investment advisors and affiliated subsidiaries as investment advisors.
“In terms of Vanguard’s work with outside managers, [the proposal] is a good thing. People can vote with their feet when it comes to the advisor lineup. And as a practical matter, this only makes sense,” he explained in an interview with ThinkAdvisor.
Proposal Details
Vanguard’s first proposal would give fund managers the ability to retain external firms as investment advisors without “expending the considerable time and expense to obtain shareholder approval via proxy solicitation” for each shift in the sub-advisory relationships.
Vanguard shareholders approved a similar proposal in 1993, the firm says, and 48 funds today have this ability to enter into or amend advisory agreements.
“The proposal, if approved, will standardize this policy across Vanguard’s entire lineup,” the firm said in a statement.
