Inside Vanguard: Leadership Secrets From the Company That Continues to Rewrite the Rules of the Investing Business

CAHPTER 5

OUT OF THE ASHES

At the outset in 1975, Bogle’s fledgling Vanguard had only a minor, mechanical business administering barely $1.4 billion of assets in a midsize group of mutual funds that were steadily losing assets. The 11 Wellington funds had experienced net redemptions by shareholders for 40 consecutive months, a trend that would continue for 40 additional months until January 1978. Total net cash outflow totaled $930 million, or 36 percent of the funds’ assets.

Bogle would recall the time as “the ghastly period of attrition.”

Even worse, the fledgling company had no control over its future because the success of every mutual fund organization depended on two major functions: investing and selling. Vanguard had zero role in either. ...