John Bogle on Investing: The First 50 Years

17

THE WINDS OF CHANGE: THE VANGUARD EXPERIMENT IN INTERNALIZED MANAGEMENT

FBA-CCH Conferenceon Mutual Funds and Investment ManagementSan Diego, CaliforniaMarch 12, 1975

I AM MOST PLEASED to have this opportunity to appear before this meeting of the Federal Bar Association, and to talk about something that is truly unique in the mutual fund industry: the restructuring of one of the pioneer mutual fund groups in a manner designed to give the Funds corporate independence and self-sufficiency, and the ability to obtain investment advisory and distribution services under terms which are negotiated at arm's length. From a business standpoint, we have done something useful, novel, and exciting; from an independent standpoint, we have something that is clearly designed to serve our shareholder; and from a legal standpoint, we have, in a real sense, converted the theoretical letter of the Investment Company Act of 1940 into the real spirit of this statute.

Wellington Fund, the original member of our Fund Group, was founded in 1928—just short of a half century ago. With the other ten Funds that were added during the ensuing years, our Group's assets presently aggregate $1.7 billion. For a large and established complex, we have taken a giant step. And you might ask “why?”

I will try to answer that key question definitively today, for there are, we believe, many good solid business and philosophical reasons behind our actions. But at the outset, I must frankly acknowledge that our new structure ...