After a jarringly sudden announcement of its CEO’s retirement, investment giant Vanguard has tapped its first outsider to serve as the firm’s fifth CEO. On July 8, Blackrock veteran Salim Ramji will take over, facing customer service challenges, uneasiness about whether an outsider will preserve the firm’s culture, and short-lived curiosity about whether he’d chart a new course for crypto.
In March, even the closest Vanguard watchers were taken by surprise when the Malvern, PA-headquartered company announced that Tim Buckley would be retiring. Unlike previous such departures, that announcement didn’t center on a transition to a named successor, suggesting to some that there may have been some disenchantment on the part of Buckley and/or Vanguard.
Tuesday’s Vanguard announcement touted the highlights of Ramji’s BlackRock tenure:
Most recently, Mr. Ramji was Global Head of iShares & Index Investing, where he was responsible for managing a majority of the firm’s client assets and evolving the iShares platform to provide an even broader set of innovative low-cost products for investors globally.
His contributions led to expanded investment access for tens of millions of investors, a more central role for ETFs in retirement and wealth portfolios and a more efficient bond market with ETFs as an enabling technology. At BlackRock, he led the implementation of a voting choice platform, which democratizes client access to the proxy voting process.
Vanguard manages $9.3 trillion in assets for some 50 million investors. The diehards call themselves “Bogleheads” — signaling their dedication to the investment philosophy of legendary founder Jack Bogle. At the center of that philosophy you’ll find Vanguard’s unique ownership structure, in which Vanguard funds own the firm, which drives a low-expense structure that’s been essential to the firm’s growth.
That ownership structure is also meant to instill an investor-first culture, but the firm’s once-sterling reputation for customer service has been tarnished in recent years. Alongside perceptions of deteriorating call-center service, navigating the firm’s website is often highly unintuitive and aggravating.
Tell ’em, Arjun:
I think you’re wrong Chris. I find the Vanguard website infuriatingly difficult to navigate and moved my accounts to Schwab. Their client service is excellent and highly responsive.
— Arjun Divecha (@arjundivecha) May 14, 2024
“I’m surprised that Vanguard went with an outside hire,” Morningstar analyst Daniel Sotiroff told MarketWatch. “This is a departure from past hires, as previous CEOs came up through the ranks and were embedded in Vanguard’s culture from early on in their careers.”
With all that in mind, Bogleheads are doubt be uneasy that much of the early reporting on Ramji’s selection — and Ramji’s statements too — focus on asset and customer growth rather than righting the ship.
“I really do believe that there can be millions more people who can benefit from what Vanguard has to offer,” Ramji told the Financial Times. “Part of the opportunity over the next five years, 10 years and beyond is to scale that capability. Even with 50 million [customers], there are millions and millions more, even in this country.”
At the same time, Ramji has made an effort to reassure investors and employees that he won’t overturn the firm’s culture. “The mission and purpose started by Bogle and continued by his successors will continue under my leadership,” said Ramji. “I plan to pursue that with the zeal of a convert.”
Historically, Vanguard has been judicious about launching new funds, with a wariness about aiding and abetting investors chasing trends over a cliff. Consistent with that cautious philosophy, Vanguard in January announced it had no intention to launch a bitcoin ETF — nor would it offer other firms’ crypto ETFs on its brokerage platform. At that time, global ETF head Janel Jackson said:
“When deciding what investment products to offer, we consider a range of factors, including whether we believe they have enduring investment merit and meet our clients’ needs. While the discussion about bitcoin and cryptocurrencies, in general, has increased recently, we do not currently believe that there is an appropriate role for them to play in long-term portfolios.”
Given Ramji led BlackRock’s enormously successful spot bitcoin ETF launch, crypto-mongers were wondering if he’ll persuade the Vanguard board that it’s in investors’ best interest after all:
Vanguard’s new CEO is Salim Ramji.
This is the same guy who oversaw the filing for BlackRock’s #Bitcoin ETF.
Probably nothing. pic.twitter.com/Ulr9YJMj2l
— Arsen | Bitcoin Therapy 📧 (@satoshibaggins) May 15, 2024
However, after his selection, Ramji signaled that Vanguard would stay the no-Bitcoin course under his leadership, telling Barron’s, “I have heard [chief investment officer] Greg Davis’ explanation and I think it is entirely consistent with Vanguard’s investment philosophy. It is a logical and consistent point of view.”
Vanguard investors who oppose ESG madness have reason to be encouraged, as the firm’s announcement highlighted Ramji’s Blackrock experience in leading “the implementation of a voting choice platform, which democratizes client access to the proxy voting process.”
As we’d reported here, Vanguard in February expanded its own pilot program that gives investors in index funds the power to choose a proxy-voting philosophy. By passing through proxy voting picks to investors, such programs help investment firms walk the line between the blue-haired ESG screechers and sensible types who don’t want their index funds to invest in an oil company only to cast votes badgering them out of the fossil fuel business.
In some ways, Vanguard has been leading the Big Three indexing firms away from the ESG precipice. In December 2022, the company withdrew from the Net Zero Asset Managers Initiative, a coalition that once had 300 asset managers signed on to reduce greenhouse gases and lower the earth’s temperature by 1.5 degrees Celsius by 2050. “[Vanguard is] not in the game of politics,” CEO Tim Buckley told Financial Times at the time.
Mr. Ramji, let’s keep it that way.
Tyler Durden
Sun, 05/19/2024 – 10:30
