MiB: Eric Balchunas on the Vanguard Effect



This week, we speak with Eric Balchunas, a senior ETF analyst at Bloomberg who has more than a decade of experience working with ETF data, designing new functions and writing ETF research for the Bloomberg Terminal. Balchunas also contributes articles, feature stories and blog posts on ETFs for Bloomberg.com and appears each week on Bloomberg TV and Bloomberg Radio to discuss ETFs. His latest book is “The Bogle Effect: How John Bogle and Vanguard Turned Wall Street Inside Out and Saved Investors Trillions.”

He explains what the Vanguard effect is — notably, the cost-conscious approach jack Bogle pioneered has had a massive impact on the business of managing assets. The Vanguard Group has continually driven costs lower for investors, forcing the rest of the asset management industry to follow suit. We discuss the secret to Vanguard as more than indexing, but rather, VG’s hyper-low cost. If passive was never invented and the Vanguard Group only did low-cost active, it still would have become a behemoth.

Over four decades, Vanguard avoided all of the scandals and negative issues the rest of Wall Street was tainted by. He explains how this led to a high level of trust and comfort by Mom & Pop investors. Once they come to Vanguard, they never leave. Even during downturns like the Great Financial Crisis in 2008-09 and the Pandemic in 2020, VG received substantial client inflows.

Balchunas marvels over Bogle’s 40-year campaign to drive costs lower. For the first half of much of Vanguard’s history, it was an uphill battle. The process of convincing investors and the rest of the industry was a slow process. Eventually, academia and Main Street came to realize the value proposition of Vanguard, leading them to their rise to the $8 trillion dollar size today.

A list of his favorite books is here; A transcript of our conversation is available here later this week.

You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Lynn Martin, President of the NYSE, which is part of the Intercontinental Exchange. NYSE is the world’s largest stock exchange, with 2,400 listed companies and a combined market cap of ~$36 trillion dollars. She began her career at IBM in its Global Services.



Eric Balchunas’ book

The Bogle Effect: How John Bogle and Vanguard Turned Wall Street Inside Out and Saved Investors Trillions by Eric Balchunas


Eric Balchunas’ Favorite Books



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