Jack Bogle, index fund pioneer, 1929-2019 Vanguard founder changed investing for millions and built group that became $5tn investment giant
Jack Bogle, founder of Vanguard and creator of the world’s first index mutual fund, has died at the age of 89. He leaves an unassailable legacy as the pioneer and leading advocate of the $10tn index investment universe.
Born in New Jersey to a family stricken by the Great Depression, he became one of the greatest men in the history of investing by ripping asunder the “great man” image of supreme, cerebral stockpickers who could beat the market.
His insight: on average, stockpickers make average returns.
He launched the first-ever index fund for ordinary investors and vociferously championed the merits of cheap, passive investing for decades. It was an astonishing success. Today, Vanguard is a $5tn investment behemoth, and one of the leading players in the global index investing industry that he helped birth.
Notably, it was a success where the gains have accrued to Vanguard’s customers and not its founder, as Bogle structured Vanguard to be owned by its investors. In an industry that has tended to enrich its pioneers with vast wealth, this was an unprecedented and still unrivalled move.
“Jack Bogle made an impact on not only the entire investment industry, but more importantly, on the lives of countless individuals saving for their futures or their children’s futures,” said Vanguard’s present chief executive Tim Buckley.
“He was a tremendously intelligent, driven, and talented visionary whose ideas completely changed the way we invest. We are honoured to continue his legacy of giving every investor ‘a fair shake’.”
John Clifton Bogle was born in Montclair, New Jersey, on May 8, 1929, and his early life was shaped by the Depression. Bogle’s father was a wellto-do businessman with inherited wealth that evaporated in the 1930s, leaving him broken and prone to drinking, and forcing Bogle and brothers to move in with their grandparents in rural New Jersey.
However, his academic record was good enough to win a scholarship to the prestigious Blair Academy, and from there he went on to gain a degree in economics from Princeton University.
Inspired by a 1949 Fortune article titled “Big Money in Boston” on the swelling mutual fund industry, he wrote a thesis on investing that caught the eye of Walter Morgan, the founder of Wellington, which managed the princely sum of $150m when Bogle joined in 1951. By the time he was 35 he was named executive vice-president and Morgan’s heir-apparent, and soon afterwards took full control.
But then the asset management wonder boy made a fateful mistake. Charged by Morgan with reinvigorating Wellington’s fortunes amid the ravenous appetite for racier stock market funds in the 1960s “go-go” boom, Bogle merged Wellington with Thorndike, Doran, Paine and Lewis, an aggressive mutual fund company in Boston. When the bull run collapsed in 1973-74, Wellington found itself on the ropes, and the four new partners brought in 1966 banded together and defenestrated Bogle.
However, he staged an audacious countercoup, convincing the independent boards of Wellington’s mutual funds to set up a new independent company that would take on the administrative tasks of running them. And thus, Vanguard was born.
At the time, some investment groups like Wells Fargo Investment Advisors, Batterymarch and American National Bank of Chicago has set up a smattering of novel, cheap funds that merely attempted to track stock market indices rather than beat them.
But at the time they were only aimed at pension funds and insurers, and when Paul Samuelson, the famed economist, called for something similar for ordinary investors, Mr Bogle saw his opening.
It was a product that fit Vanguard — which was at the time prohibited from running active, managed investment funds — and appealed to the headstrong investor, whose Princeton thesis had after all noted that “funds can make no claim to superiority over the market averages”, and should be operated in the most efficient, honest, and economical way possible”.
Vanguard’s first fund was initially a miserable failure. The First Index Investment Trust went live with a measly $11m in August 1976, and was quickly dubbed “Bogle’s Folly”. Today, the renamed Vanguard 500 is a $400bn giant, and Vanguard is the second biggest investment company in the world.
Bogle’s famous determination was the driving force behind its growth until he retired as senior chairman in 1999, and he remained a vociferous champion of index funds until he passed away on Wednesday.
In a series of interviews with the FT last autumn Bogle said: “It was a crusade. If you really believe in something, you have to become a preacher,” he says. “I believed the numbers would ultimately tell. The superiority of the index is guaranteed. The math will never let you down.”
Dennis Kelleher, the head of Better Markets, an advocacy group, said that Mr Bogle’s “enduring legacy will not be a vast fortune, multiple houses, an art collection, a personal plane, his name on university buildings purchased with outsized contributions, or any such tawdry and temporary markers of worth.”
“It will be his innovative index funds and tireless effort to make it easy and low-cost for tens of millions of hardworking Americans to invest in the stock market and achieve the American dream.”
Perhaps the greatest endorsement — and for Bogle certainly the most enjoyable one — came from Warren Buffett, the famed Berkshire Hathaway chairman who regularly exhorts would-be investing acolytes to simply buy an index fund, who said that Vanguard’s founder was one of his heroes.
“If a statue is ever erected to honour the person who has done the most for American investors, the hands down choice should be Jack Bogle,” he wrote in one of his annual letters. “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.”