Vanguard moving to the, um, vanguard?

10 December 2007

Financial Week reports that Vanguard, long-time champion of passive investing has shown an uncharacteristic interest in absolute return (read: hedge fund) investing recently.  Says the paper:

“The mutual fund company renowned for championing cheap and passive investing for institutions and regular people alike quietly dipped its toe into the murky pool of hedge funds last week with the launch of a hedge-like mutual fund called Vanguard Market Neutral. And but for the exception of a few online diehard “Bogleheads”—indexing purists named for Vanguard founder and indexing pioneer Jack Bogle—almost no one batted an eyelash.”

Lipper senior analyst Ferenc Sanderson tells Financial Week that this is another example of mutual funds “jumping on the bandwagon” when it comes to using hedge-like strategies.  And Morningstar’s Marta Norton says this is probably proof that hedge funds are “of much broader interest” than people thought, telling Financial News, “Maybe there is more staying power”.

Naturally, some disciples of Vanguard founder and former CEO, John Bogle aren’t amused.  So far, Bogle hasn’t posted any comments about this issue on his own blog.  (However, it seems to take a Bogle speech or TV appearance for the blog to be updated.)

For one possible reason for this shift in strategy, check out this item in Investment News today “Domestic ETF Assets Dip $8 Billion“.

Ed: If you’re interested this kind of thing, we’ve had an AllAboutAlpha.com category for over a year called “Hedge/Long-only Conversion”.  Check out our postings on the topic here or archived news stories here for more on this phenomenon.

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