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The late Vanguard Group founder John C. Bogle suggested that people “avoid Bitcoin like the plague.” Scott Eales/Bloomberg via Getty Images
In 2017, legendary investor Jack Bogle famously warned people to “avoid Bitcoin like the plague.” More than six years later, Vanguard Group is still sticking to its late founder’s conservative investment approach, sparking anger in the crypto industry.
Amid the euphoria unleashed by the long-awaited debut of the first full-fledged Bitcoin exchange-traded fund (ETF) in the U.S., Vanguard last week said it would refuse to offer new ETFs on its giant trading platform. He made a sharp decision and caused a stir.
#BoycottVanguard started trending on X, accumulating thousands of posts with users pledging to withdraw their funds from the wealth management giant.
What was Vanguard’s reaction? Double down. The company, which manages $8.6 trillion, not only locked out physical Bitcoin products, but also pulled Bitcoin funds backed by futures from its platform. This means that unlike its peers, it currently does not offer any crypto products.
This story speaks to Vanguard’s deeply ingrained investment philosophy and is reminiscent of Bogle’s own words. The Valley Forge, Pennsylvania-based company was founded by the money management icon in 1975 with a foundation of investing in stocks and bonds (assets that generate cash flow, dividends and interest payments) while eschewing commodities.
Vanguard has traditionally avoided the latter (which it believes lacks intrinsic value and internal rate of return), and Mr. Bogle has dismissed commodity investing as “pure speculation.” Modern-day Vanguard remains true to that gospel nearly half a century later, managing just one of his more than 400 commodity funds offered around the world.
“It’s no surprise that Vanguard has taken this stance,” said Ben Johnson, director of client solutions at Morningstar. That’s because we are doing so.”
This discipline extends beyond Vanguard’s own lineup of mutual funds and ETFs to its securities division. Commodity ETFs can be traded, but the company removed “highly speculative and highly complex” leveraged and inverse products from its platform in 2019.
Even with billions of dollars flowing into the newly launched Spot Bitcoin ETF, Vanguard has no plans to offer crypto-related products, a spokesperson said.
“I don’t need a gatekeeper.”
Vanguard’s rejection of cryptocurrencies stands in stark contrast to its peers. BlackRock Inc., Fidelity Inc. and Invesco Inc. all launched spot Bitcoin ETFs last week, and centuries-old State Street provides fund services for several products.
Meanwhile, Franklin Templeton is laser-focused on Benjamin Franklin’s X avatar and is doing his best to market his Bitcoin fund. defend An investor adds Bitcoin to a 60/40 portfolio.
The adoption of Bitcoin ETFs by traditional financial institutions has only fueled online anger against Vanguard.
“I don’t need a gatekeeper telling me how to invest,” one post by X reads. 2,600 likes!. “I go where I and my money are treated best,” another wrote. screenshot Regarding Vanguard Plan distribution request.
Still, industry expert Dave Nadig says the #BoycottVanguard movement is highly unlikely to impact the company’s business.
“They won’t lose any of their 401k plans because of it, and they won’t lose a very small number of brokerage customers,” Nadig said.
Meanwhile, money continues to flow into Vanguard’s lineup. After raising $157 billion in 2023, Vanguard added about $4.4 billion to its stable of 84 ETFs in the past week alone, more than any other asset manager, according to Bloomberg data. ing. Vanguard has increased its share of the $8 trillion ETF market for 21 straight years and is on the verge of dethroning industry leader BlackRock.
Despite drawing scorn from the crypto community, Vanguard has been known for its exorbitant fees and unique corporate structure, where fund investors elect board members and effectively own the company. It remains a cult favorite online. The forum Bogleheads.org prohibits posts related to “investment strategies based on securities or physical assets that have no underlying value or negative expected long-term returns” (hint: cryptocurrencies).
Avoiding crypto ETFs could be a long-term risk if it ultimately turns younger investors away, but it’s small compared to Vanguard’s loyal base, according to Eric Balchunas of Bloomberg Intelligence. He says it’s a risk.
“To be honest, Vanguard can’t prevent money from flowing in,” said Balchunas, senior ETF analyst at Bloomberg Intelligence and author of Vanguard. Bogle effect. “Vanguard doesn’t do anything when they say, ‘Stop investing in us.’ They’ve built a tremendous amount of trust and goodwill with their customers.”
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