MIAMI-John Bogle, founder and former chief executive of Vanguard, recalled his first speech before The National Investment Company Service Association's Annual Conference & Expo in 1977, when he predicted a shareholder revolution. While that hasn't happened, he told this year's conference last Tuesday, he believes a shift in mindset is, nonetheless, underway.
"I have a dream," Bogle said. That dream includes an industry where mutual fund investing is designed "for the shareholder, by the shareholder."
To accelerate that shift, Bogle laid out five mandates for the mutual fund industry.
First, Bogle said, funds must share economies of scale with shareholders through lower fees. Second, the industry must "serve investors for a lifetime" by educating them about the importance of holding funds long term. Third, Bogle asked industry leaders to lower asset turnover, since some funds now turn over 110% of holdings a year. Frequent trading, while lucrative for custodians, erodes shareholder value, he said.
Fourth, Bogle called for fund companies to serve the long-term shareholder, not the short-term gains-seeker, and finally, Bogle said, fund directors should be truly independent, and each fund must have its own board.
"The groundwork has been laid," Bogle said. "I'm gonna stick to my dream," he said, promising to update the NICSA membership on the status of his predictions in another 10 years.
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