Mutual Funds
Vanguard's Bogle retires
August 12, 1999: 6:41 p.m. ET

A legend in the fund industry who fought for lower costs will step down
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - John Bogle, the founder of Vanguard Group whose beliefs about low-cost investing and indexing helped transform the mutual-fund industry, will resign from the company's board of directors.
     Bogle will step down at the end of the year because of a policy requiring board members to retire when they reach age 70, the company said Thursday. He turned 70 in May.
     The company disputed speculation that Bogle was pushed out because of differences over future growth with chief executive John Brennan, the protégé Bogle groomed for years and hand-picked to replace him.
     "Mr. Brennan and Mr. Bogle have agreed on the major decisions regarding Vanguard," said John Woerth, a spokesman for the Valley Forge, Pa. fund giant.
     Mutual fund analysts predicted investors wouldn't see much change as a result of Bogle's resignation. They praised Bogle for his outspokenness on issues and said the company has embraced his beliefs about the importance of low-costs and long-term investing.
     "The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," said Russ Kinnel, head of mutual funds at Chicago fund-tracker Morningstar. "The fund industry is a much better place because of him."

     Bogle has been known as a feisty and table-pounding leader who isn't afraid to speak his mind, Kinnel said. Bogle was a backer of indexing when most people in the fund industry scoffed at the idea, he said.
     "Most fund company executives are very careful about what they say," Kinnel said. "Everybody could use a Jack Bogle."
     Bogle, who founded the company in 1975, stepped down as chief executive in January 1996, a month before undergoing a heart transplant for a congenital heart defect. At the time, he said he was nominating his "heir-apparent," Brennan, to take his place.
     "Jack Brennan is the best person I could possibly have found," Bogle said at the time.
     Even after the surgery, Bogle remained a force in the industry, Kinnel said. Bogle has written several books, including the 1999 "Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor."
     "He made investing make sense," Kinnel said. "His books are as good a read as you can find on investing."
     Kinnel recalled that Bogle was as boisterous as ever when he attended Morningstar's annual investing conference not long after his heart transplant.
     "He was raring to go," Kinnel said with a laugh. "He said he was ready to go out there and start being a firebrand again."
     But some analysts said Brennan, 45, may have been more in sync with changing times.
     "These are changing times, and I'm sure the smart, young people there want to adjust to the times," said one analyst who didn't want to be named. "John Bogle is 70, and I'm sure he was crotchety. He was crotchety at 50, whereas Brennan was more attuned to the times."
     Brennan, a graduate of Harvard Business School, joined Vanguard in 1982.
     "John Brennan is a very smart guy - no nonsense, abrasive, sharp, provocative," said Bill Dougherty, an analyst at Kanon Bloch Carre in Boston.
     Said Kinnel, "There's no question you've got two strong-willed, opinionated people. Brennan is in a tough position because he's following the legend but the legend is still around."
     Woerth argued the two men have agreed on major decisions, including the closing of the Vanguard Health Care Fund in February; and the addition of Sanford Bernstein to help manage part of the Vanguard Windsor Fund.
     Another board member, Barbara Barnes Hauptfuhrer, resigned in 1998 after turning 70, Woerth said.
     While Bogle has expressed concerns with so-called fund "supermarkets," because they encourage people from drifting away from long-term investing, Bogle was happy with safeguards Vanguard took with its own program, Woerth said.
     In the program, Vanguard set a higher minimum investment requirement of $5,000; charged a 1 percent fee for shares redeemed in less than a year; and imposed strict rules on exchanges.
     Woerth said it will be up to the board, Brennan and Bogle to decide what, if any, role Bogle will have after retirement. Kinnel said he understands Bogle will maintain an office at the company.
     "He'll still have a big impact and a lot of influence," Kinnel said. "Brennan is not the outspoken zealot that Jack Bogle is. People want Jack to stay at Vanguard because he calls it like he sees it."
     Both Brennan and Bogle were on vacation and unavailable for comment.Back to top


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