Why ownership matters

Follow the money

Does it matter who owns your investment management company?

Yes, if you follow the money. In other words, where do company profits go?

It's a question worth asking, because the money you pay to your investment manager for its services is deducted from your returns.

All mutual funds are owned by their shareholders—but the shareholders typically don't own the companies that manage the funds. Instead, nearly all investment management companies are owned by third parties—either stockholders, in the case of publicly traded firms, or private interests.

Of course, these owners expect to make a profit from their enterprise. Predictably, this arrangement can lead to conflicts of interest. What's best for fund shareholders isn't necessarily what's best for the management companies' owners.

Vanguard is a very different kind of investment firm—founded on the simple but revolutionary idea that a mutual fund management company should be managed in the sole interest of its funds' investors.

At Vanguard, there is no third party. The company is owned by its funds, which in turn are owned by their shareholders—including you, if you're a Vanguard investor.

In other words, Vanguard is structured as a "mutual" mutual fund company. It's the only firm in the industry that works this way. This unique structure aligns our interests with those of our clients and provides benefits to investors worldwide.

Vanguard is different from the rest—and here's how our investors benefit.

The typical fund management company is owned by third parties, either public or private stockholders, not by the funds it serves. These fund management companies have to charge fund investors fees that are high enough to generate profits for the companies' owners. In contrast, the Vanguard funds own the management company known as Vanguard—a unique arrangement that eliminates conflicting loyalties. Under its agreement with the funds, Vanguard must operate "at-cost"—it can charge the funds only enough to cover its cost of operations. No wonder Vanguard's average fund expense ratio in 2014 was 0.18%, less than one-fifth that of the 1.02% industry average. That means Vanguard fund investors keep more of any returns their funds earn.

All investing is subject to risk, including possible loss of the money you invest.

For more information about Vanguard funds, visit to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

© 2014 The Vanguard Group, Inc. All rights reserved. Vanguard Marketing Corporation, Distributor.

A long-term focus

Our client-first approach is having an impact

Map showing Vanguard offices worldwide as of 2013

Because we're not publicly traded, Vanguard can stay focused on the long term, rather than catering to outside owners or the short-term expectations of Wall Street. We're able to support our fund managers in seeking superior performance over many years, and we can make long-term investments to help improve services and reduce costs for our client-owners.

That's how we've been able to keep lowering the costs of investing ever since our launch in 1975. In fact, our presence has created what's been called "the Vanguard effect"*: As we enter new markets around the globe, other investment companies have responded by cutting their fees to compete.

*Morningstar, Inc., June 29, 2009.

The bottom line

Benefits for our clients