Are Vanguard/Blackrock acting in your interest?

Investing / Others
27

I do now. I crawled through their “Statement of Additional Information” document on their page for VTSAX.

It is as I feared: The 11 trustees elect themselves.

(page B-27)

But they can be removed/elected through the 1940 Act.

(page B-2)

As for control of Vanguard. They state that:

(page B-24)

Also you can find part of the Vanguard ownership distribution on page B-25.

Who is the board of Vanguard? The same 11 people.

tl;dr: Everything Vanguard is controlled by the same 11 people. They elect themselves, but can be replaced by shareholder vote. The Vanguard company is held by the funds proportionally to fund net assets.

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28

I personally refuse Blackrock and Vanguard. There are plenty of other alternatives.

29

Can you suggest alternatives and what exactly they are doing different than Blackrock/Vanguard?

30

I guess I lied I bit, there is no direct alternative to something like VT but you can pretty easily build your own portfolio which is more or less the same using Avantis, Strive, Charles Schwab. Only Avantis offers an alternative to VT: AVGE and AVGV (which will be released next month).

Strive for example was only started to go against Blackrock’s and Vanguard’s political agenda. When I read through Avantis statement on the matter I didn’t find anything related to identitiy politics/quotas based on race/sex/religion and Charles Schwab have also stated that they are unpolitical.

Of course none of these even come close to having the power that Vanguard, Blackrock and State Street. But at least I can sleep well at night knowing that my money isn’t used to push for politics that I don’t agree with and actually hurts profits.

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31

Is Vanguard pushing for this? Are they in the ESG boat? Did you find some examples of it? I guess that would go against what Bogle stood for, but maybe I know too little on the subject…

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32

Yes, you can read on their website. For example they backed a DEI proposal at American Express. Although, there does seem to be some backlash recently and Vanguard looks better than Blackrock.

I guess that would go against what Bogle stood for

For sure. I am bit unsure how this has happend but since Vanguard is owned by its owners, if most of those owners are american pension funds, college endowment funds and the like they will be the ones pulling the strings? But here I am speculating.

It is behind a paywall, but the Washington Post wrote about this recently: https://www.wsj.com/articles/committee-to-unleash-prosperity-esg-proxy-vote-ranking-investment-goldman-sachs-blackrock-glass-lewis-iss-29401488

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33

Well, it’s a shame. I always thought Vanguard’s structure is great, as when Vanguard is owned by its customers, then that reminds me of the Gennosenschaften in Switzerland, which are cheaper to rent than commercial real estate.

Maybe a “fix” to that problem would be to ban institutional investors from owning their securities? If only private persons could invest, perhaps with a 0.1% cap to avoid concentration, maybe this would help. Somehow I feel it’s best not to mix the interests of retail investors with institutionals.

34

I completely agree with this. A Vanguard for only retail would be amazing. For example Blackrock is now giving the possibility for institutional to have a say in how they vote, but that doesn’t solve the problem at all as the institutiona investors are the problem to begin with.

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35

For sure a fund owned by individuals only with no one having an outsized share could be “interesting”. In the sense of who would buy that and what different (or equal) decisions would such a fund take.

But institutions bring an enormous amount of assets to the table. That can make the fund cheap through economies of scale. They also have much better chances at complementary ways to bend the rules in their favor (lobbying, lawyering).

I’d wager many here would not even give an additional 0.1% TER for such alternative constructions.

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36

Yes, this is something I thought as well and it is quite concerning (if I understand it right). But nobody seems to care much about it…

…Until something happens.

Because the way I see it… not only you are not the real owner of the indexed companies shares, you are probably not even the owner of the ETF shares.

37

Reuters: BlackRock to expand proxy voting choice to retail ETF investors | Reuters
Wonder if this might trigger a change with Vanguard beyond their pilot program. Not that I personally care much, especially as long it doesn’t raise TER :dollar: Especcially the BlackRock program seems to be just ‘woke’ signaling, allow it for 1-4 ETFs only. :woman_shrugging:

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