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John C. Bogle, Vanguard Group's founder and senior chairman, may be asked to retire from the giant fund group's board, The Wall Street Journal reported. Bogle is identified with Vanguard, the Malvern, PAcompany that he founded, to an extent that is rare in almost any industry. His championing of low-cost, index-based mutual funds - as well as his frequent, blistering criticism of higher-cost competitors - has been a factor in changing how U.S. residents invest, and has made him an icon to mutual-fund investors. Vanguard has grown to become the second-largest mutual-fund company, managing assets of $490 billion. His successor, John Brennan, has continued to advocate low-cost investing and index mutual funds, as Bogle did. But the two men have disagreed over policy at times, including Vanguard's expansion into the discount-securities-brokerage business - which Brennan championed, but which Bogle has described as encouraging a casino mentality among investors. The disagreements between Bogle and Brennan have fed rumors of bad blood between the two men. And one person familiar with the situation described it as similar to a "breakdown in a marriage that built up over time." In the past Brennan has denied the rumors, but Bogle, when asked recently about his relationship with his successor, replied, "That's an essay question," and wouldn't comment further. Bogle said the board has a general policy that directors retire at 70, but not a mandatory retirement age, and the question is whether an exception would be made for him. He turned 70 in May. But Vanguard Group has reiterated previous statements that its board of directors would probably follow its retirement policy and require its founder to retire at year end, despite his hopes that an exception will be made. Nonetheless, many in the mutual-fund industry had seen Bogle's continued involvement on the board as a foregone conclusion. "It would be a huge mistake to leave Jack [Bogle] in just a ceremonial role and not on the board of directors; he is the public face of Vanguard Group," said Dan Wiener, editor of the Independent Adviser for Vanguard Investors, a newsletter in Potomac, Md. The board next meets in September. Merrill Lynch & Co., seeking to beef up its offerings of index funds and other mutual funds using quantitative strategies, has hired away a team from Deutsche Bank AG. The new hires, led by Frank Salerno, will form the core of a unit Merrill is creating, called Merrill Lynch Quantitative Advisors. It will be headed by Dean D'Onofrio, who left Bankers Trust Corp. two years ago to build Merrill's stock-derivatives desk. Salerno, 39 years old, said his team helped manage more than $200 billion in quantitative funds at Bankers Trust, which was recently taken over by Deutsche Bank. Only about $6 billion of Merrill's $500 billion in assets under management is in funds of that type. With the change in ownership, "it seemed like a natural point to depart," Salerno said. He added that the opportunity to build Merrill's index-fund business almost from scratch was attractive. Merrill plans to add some funds designed to mirror the performance of certain stock indexes along with enhanced index funds that will be designed to outperform the indexes, D'Onofrio said. Merrill also plans to offer funds that use more complicated quantitative techniques and some hedge funds that will be offered to institutions and wealthy individuals. Merrill has a few so-called vanilla index funds designed to match the performance of benchmarks like the Standard & Poor's, but that area has "never really been a focus," D'Onofrio said. The goal is expanding that business, "largely by going directly after the big institutional clients." The move to add quantitative funds doesn't signal a radical shift in Merrill's strategy, he said. Merrill sees index funds as "a basic building block" for a global firm that wants to provide every type of investment its customers want. FTSE International has a new Sales and Marketing Director. Donald Keith is now in charge of the licensing and marketing of FTSE's indexes, a job that was previously carried out by a consulting firm. |
1999