WEBVTT - Influencing Capital Allocation with Karin Risi 0:00:02.520 --> 0:00:11.880 Bloomberg Audio Studios, Podcasts, radio News. This is Masters in 0:00:11.960 --> 0:00:15.440 Business with Barry Ritholts on Bloomberg Radio. 0:00:16.640 --> 0:00:19.840 This week on the podcast, I have an extra special guest, 0:00:20.239 --> 0:00:24.040 the Vanguard Group's Karen reci the person who is responsible 0:00:24.079 --> 0:00:29.160 for so many initiatives, so much growth, so many new products, 0:00:29.200 --> 0:00:35.240 including the Vanguard Ria, the internal advisory service that runs 0:00:35.240 --> 0:00:38.240 three hundred and fifty billion dollars. This is a fascinating 0:00:38.320 --> 0:00:42.080 conversation if you're at all interested in what it's like 0:00:42.200 --> 0:00:45.400 to be part of a fast growing organization that is 0:00:45.880 --> 0:00:49.080 racking up trillions of dollars in assets, what it's like 0:00:49.159 --> 0:00:53.320 to create new initiatives. Really, this is tour de force conversation. 0:00:53.840 --> 0:00:56.800 She has just concluded about twenty eight years at Vanguard 0:00:57.040 --> 0:00:59.640 and is moving over to Harbor Vest, which is the 0:00:59.680 --> 0:01:03.640 out side private equity shop that Vanguard has been working with. 0:01:04.400 --> 0:01:06.840 I thought this conversation was fascinating, and I think you 0:01:06.920 --> 0:01:11.720 will also with no further ado, my conversation with the 0:01:11.800 --> 0:01:15.480 Vanguard Group and Harbor Vests Karen REESI. 0:01:16.800 --> 0:01:18.600 Thanks for having me, Barry. I'm happy to be here. 0:01:18.840 --> 0:01:21.240 I'm happy to have you. I want to talk about 0:01:21.240 --> 0:01:25.759 your time at Vanguard, but before I do that Bachelor's 0:01:25.800 --> 0:01:30.039 in Finance MBA from Villanova. Finance always was a career plan. 0:01:30.080 --> 0:01:31.160 That's what it kind of looks like. 0:01:32.000 --> 0:01:35.040 Yes, I think it looks that way, but I'll say 0:01:35.040 --> 0:01:37.960 I got more intentional over time, Barry, But no, I 0:01:38.040 --> 0:01:41.040 initially actually wanted to go to art school. Oh real 0:01:41.120 --> 0:01:41.880 little known fact. 0:01:41.959 --> 0:01:44.679 Yes, so we did from Villanova. Do you go straight 0:01:44.720 --> 0:01:46.640 into the NBA or do you work and then go back? 0:01:46.800 --> 0:01:50.040 I worked for a few years at Sinoco in Center City, Philadelphia, 0:01:50.120 --> 0:01:53.680 and then I started my MBA there and then joined 0:01:53.760 --> 0:01:55.880 Vanguard and finished up my MBA in my first couple 0:01:55.880 --> 0:01:56.640 of years at Vanguard. 0:01:56.800 --> 0:01:59.400 Really, so right from business school and then the only 0:01:59.400 --> 0:02:02.960 company you've worked for since school is Vanguard. That's an 0:02:02.960 --> 0:02:05.840 impressive run. How did you find your way to Vanguard? 0:02:06.560 --> 0:02:09.320 Like so many people at Vanguard, I had a friend 0:02:09.320 --> 0:02:12.000 that worked there, So I was a couple of years 0:02:12.080 --> 0:02:15.200 out of school in investor relations at Snoko, and then 0:02:15.280 --> 0:02:18.040 I had a friend who said, you know, if you 0:02:18.080 --> 0:02:21.440 want to get more into finance and investments, we have 0:02:21.480 --> 0:02:23.560 an opening at Vanguard. I think you'd really like it. 0:02:23.720 --> 0:02:27.639 And that truly is how I got into the interview process. 0:02:27.680 --> 0:02:29.000 I grew up in the area. I grew up in 0:02:29.000 --> 0:02:33.160 the suburbs of Philadelphia, so I knew Vanguard go Berts, yes, 0:02:33.360 --> 0:02:36.400 but I didn't know really that much about it, and 0:02:36.440 --> 0:02:39.080 I only had one friend who worked there. But I 0:02:39.120 --> 0:02:41.799 went for the interview process and joined as an investment 0:02:41.840 --> 0:02:43.200 analyst in nineteen ninety seven. 0:02:43.440 --> 0:02:46.800 So late nineties, Vanguard had to be a really interesting place. 0:02:46.800 --> 0:02:48.280 What was it like during that period? 0:02:48.639 --> 0:02:53.079 It was an interesting place. It was not an unknown 0:02:53.440 --> 0:02:57.160 like many of my you know, retired predecessors are. You know, 0:02:57.200 --> 0:02:59.440 when they joined Vanguard in the eighties, it was really 0:03:00.040 --> 0:03:03.239 off the radar. We were starting to gain traction. Indexing 0:03:03.360 --> 0:03:06.880 was starting to gain traction, the hiring classes were getting bigger. 0:03:06.919 --> 0:03:09.360 So I joined with you know, dozens of other people 0:03:09.639 --> 0:03:13.160 when I joined Vanguard in May of ninety seven, and 0:03:13.919 --> 0:03:17.440 you know, we were still though, this small ish firm 0:03:17.720 --> 0:03:22.760 in Malvern, Pennsylvania, Valley Forge, Pennsylvania, very different from Wall Street. 0:03:23.320 --> 0:03:27.240 So if you join Vanguard in ninety seven, Jack Brennan. 0:03:27.000 --> 0:03:28.160 Is CEO, is that right? 0:03:28.280 --> 0:03:29.120 That's exactly right. 0:03:29.280 --> 0:03:34.760 A delightful, serious individual and I find him, like every 0:03:34.800 --> 0:03:37.880 other prior CEO of Vanguard, fascinating guy. 0:03:38.280 --> 0:03:41.440 Yes, yes, and you're right a serious individual. Yes, Jack 0:03:41.680 --> 0:03:43.360 was leading the firm by the time I got there 0:03:43.360 --> 0:03:46.080 in ninety seven, but of course Jack Bogel was still 0:03:46.360 --> 0:03:50.080 sort of around present on campus. You know, his whole 0:03:50.120 --> 0:03:52.160 spirit looms large even today. 0:03:53.280 --> 0:03:57.360 And so if I memory serves, it was only a 0:03:57.360 --> 0:04:01.040 couple of years later Brennan kicked himself up to chairman 0:04:01.280 --> 0:04:04.200 and Bill McNabb comes in it as CEO. So you 0:04:04.360 --> 0:04:08.160 worked with some really tremendous corporate leaders. 0:04:08.320 --> 0:04:10.560 I did. In fact, if you think about the CEOs 0:04:10.560 --> 0:04:13.480 at Vanguard I worked. I had a really special opportunity 0:04:14.040 --> 0:04:16.560 to work directly for Jack Brennan, just for one year 0:04:16.600 --> 0:04:20.680 on a special assignment working on scalable advice, which we'll 0:04:20.760 --> 0:04:24.400 figure later into my career trajectory. And then I worked 0:04:24.400 --> 0:04:28.360 directly for Bill McNabb, our next CEO. I worked for 0:04:28.440 --> 0:04:31.480 him in multiple capacities when he was running our institutional business, 0:04:31.839 --> 0:04:33.520 and then again I worked for him directly as a 0:04:33.520 --> 0:04:36.680 member of the senior team when he was CEO. Similarly, 0:04:36.760 --> 0:04:41.400 Tim Buckley, our last CEO, worked for him in multiple capacities. 0:04:41.440 --> 0:04:43.400 He ran our retail division, and I was working for 0:04:43.480 --> 0:04:45.160 him at that time, and then I worked for him 0:04:45.680 --> 0:04:47.839 again when he took the CEO spot. 0:04:48.440 --> 0:04:50.680 So you mentioned Jack Bogel. Did you get to spend 0:04:50.720 --> 0:04:52.640 a lot of time with him? He is Saint Jack 0:04:52.800 --> 0:04:54.080 is pretty legendary. 0:04:54.279 --> 0:04:57.280 He is legendary for sure, not a lot of time. 0:04:57.360 --> 0:05:00.320 I never worked directly with Jack, but as I I said, 0:05:00.440 --> 0:05:02.760 you know, I was working on the third floor of 0:05:02.839 --> 0:05:05.080 the Victory Building, which is where Jack still had his 0:05:05.640 --> 0:05:07.440 office for a time, and then he moved down to 0:05:07.440 --> 0:05:10.160 the second floor. So he was very present on campus 0:05:10.520 --> 0:05:12.800 in my earliest years at Vanguard, but I did not 0:05:12.880 --> 0:05:13.800 work with him directly. 0:05:14.240 --> 0:05:18.560 So you were head of strategy, Product, marketing, Communications? Like, 0:05:18.720 --> 0:05:20.960 is that one job? Is that four jobs? Tell us 0:05:20.960 --> 0:05:24.040 a little bit about your progression over twenty seven years 0:05:24.480 --> 0:05:26.120 through the leadership ranks at Vanguard. 0:05:26.360 --> 0:05:29.799 Yeah, that what you just described was my final post 0:05:29.800 --> 0:05:33.320 at Vanguard, and it was, yeah, kind of like four jobs, 0:05:33.360 --> 0:05:37.160 but it was one one assignment throughout the twenty seven 0:05:37.200 --> 0:05:38.960 years though I had, as you know, a bunch of 0:05:38.960 --> 0:05:43.240 different roles at Vanguard, really strong rotational culture at the firm. 0:05:43.640 --> 0:05:46.920 So I joined in the corporate division as an investment analyst. 0:05:47.000 --> 0:05:49.159 Then I moved to corporate strategy. Then I moved and 0:05:49.200 --> 0:05:51.480 I did probably a five year stint in a couple 0:05:51.480 --> 0:05:54.520 of different roles in our institutional division, and then I 0:05:54.560 --> 0:05:59.080 spent probably a dozen years in our retail division, where 0:05:59.120 --> 0:06:01.640 as you mentioned, I ran the Ultimately I ran the division, 0:06:01.640 --> 0:06:04.720 but I started in different roles in the division, particularly 0:06:04.839 --> 0:06:08.400 leading the advisory group before taking over. And then my 0:06:08.480 --> 0:06:11.520 final post before I retired at the end of last 0:06:11.600 --> 0:06:17.359 year was as you mentioned, strategy marketing, global investment, product development, 0:06:17.560 --> 0:06:19.960 oversight of all of our external managers, and then also 0:06:20.040 --> 0:06:20.880 corporate communication. 0:06:21.080 --> 0:06:23.560 So let's put some flesh on the bones. So when 0:06:23.600 --> 0:06:27.960 I hear corporate communications, I think investor relations, public relations, 0:06:28.680 --> 0:06:32.359 just and for It's kind of interesting for most of 0:06:32.440 --> 0:06:37.839 Vanguard's history, not a very aggressively public firm, kind of 0:06:37.839 --> 0:06:41.800 a low key firm. Not that Jack was low key, 0:06:41.960 --> 0:06:46.479 but the firm itself wasn't doing the usual rounds. Isn't 0:06:46.480 --> 0:06:48.520 out there yelling and jumping up and down with the 0:06:48.600 --> 0:06:52.680 hair on fire, just very quietly, at least from my observation. 0:06:52.839 --> 0:06:53.960 Tell me if I'm wrong. 0:06:53.839 --> 0:06:57.360 No, I think that's a fair characterization. Jack Bogel certainly 0:06:57.520 --> 0:07:01.599 was out in the industry and vocal at the firm level. 0:07:01.760 --> 0:07:04.440 You're right, we didn't do a lot of advertising. We 0:07:05.279 --> 0:07:08.279 were quite happy to be in Malvern, Pennsylvania and sort 0:07:08.279 --> 0:07:11.600 of out of the limelight. That was intentional on our part, 0:07:12.000 --> 0:07:14.880 especially in the earlier years. I think over time we've 0:07:14.880 --> 0:07:18.280 gotten far more comfortable taking a stand and expressing our 0:07:18.320 --> 0:07:22.000 point of view. But by and large your characterization is fair. 0:07:22.520 --> 0:07:26.600 The corporate communications function at Vanguard today, you know, has 0:07:26.680 --> 0:07:29.760 evolved considerably from back in the early days. We now 0:07:29.760 --> 0:07:33.440 have a crisis communications function, certainly a well developed and 0:07:33.480 --> 0:07:36.960 global PR function, as well as all of the standard 0:07:37.000 --> 0:07:39.600 sort of corporate messaging and things that you would see 0:07:39.640 --> 0:07:40.720 on our digital properties. 0:07:41.040 --> 0:07:44.840 Product development, that's such an ambiguous phrase. Tell us what 0:07:44.920 --> 0:07:48.000 product development means specifically at Vanguard. 0:07:48.640 --> 0:07:52.160 Of course, for Vanguard, it means investment product development. So 0:07:52.440 --> 0:07:56.280 I head oversight of our four hundred and twenty plus 0:07:56.360 --> 0:07:59.880 the numbers probably even greater now, first mutual funds and 0:07:59.840 --> 0:08:03.760 increasingly ETFs, and we do as you know, all of 0:08:03.760 --> 0:08:07.040 our passively managed products are our managed in house by 0:08:07.080 --> 0:08:10.960 our investment management group. But our actively managed funds are 0:08:11.000 --> 0:08:13.160 active equity funds. I should say, we do active fixed 0:08:13.160 --> 0:08:16.960 in house, but our active equity funds are subadvised to 0:08:17.240 --> 0:08:19.840 a stable of investment advisors, and I had purview over that. 0:08:19.920 --> 0:08:23.720 My team's identified and then oversaw and built the relationships 0:08:23.720 --> 0:08:26.720 with each of those external advisors firms like Wellington, Prime Cap, 0:08:26.760 --> 0:08:27.200 et cetera. 0:08:27.640 --> 0:08:30.320 And a lot of people don't realize because you know, 0:08:30.440 --> 0:08:35.840 Vanguard and Blackrock are synonymous with broad indexing. But am 0:08:35.920 --> 0:08:38.320 I getting the numbers right? About twenty five percent on 0:08:38.360 --> 0:08:41.080 the equity side is active or is it even higher 0:08:41.160 --> 0:08:41.400 than that? 0:08:41.880 --> 0:08:44.600 It's about probably just shy of a trillion dollars in 0:08:44.760 --> 0:08:45.520 active equity. 0:08:45.600 --> 0:08:47.000 Uh huh that's real money. 0:08:47.040 --> 0:08:48.160 Yeah, yeah, it's real money. 0:08:48.280 --> 0:08:51.200 How many subadvisors are you working with? And what is 0:08:51.200 --> 0:08:52.160 that process like? 0:08:52.559 --> 0:08:55.120 Well? Today, I think the number it fluctuates a bit 0:08:55.200 --> 0:08:57.960 as we add managers to the stable in part ways 0:08:58.000 --> 0:09:00.240 with some others, but I think the high water mark 0:09:00.320 --> 0:09:02.240 was probably in the mid twenties. It's probably down to 0:09:02.240 --> 0:09:04.440 twenty two or twenty three now, you have to check 0:09:04.480 --> 0:09:06.200 with the team. But when I left, I think it 0:09:06.240 --> 0:09:09.000 was about twenty two or twenty three different managers. And 0:09:09.480 --> 0:09:12.000 given the design of the product and the client need 0:09:12.000 --> 0:09:14.320 we're trying to meet, we look for the best possible 0:09:14.400 --> 0:09:16.080 active manager to fill that mandate. 0:09:16.720 --> 0:09:20.400 So I didn't realize until you just said this earlier. 0:09:21.120 --> 0:09:24.720 All of the active fixed income is in house, but 0:09:24.840 --> 0:09:29.800 the active equity is external. What's the difference between the 0:09:29.840 --> 0:09:32.840 two for our audience? I think I have an idea 0:09:32.880 --> 0:09:36.520 of the difference in terms of active fixed income has 0:09:36.600 --> 0:09:40.120 certain attributes that active equity doesn't, but I want to 0:09:40.160 --> 0:09:40.720 hear it from you. 0:09:41.040 --> 0:09:45.880 Well, maybe one minor clarification. Vast majority of our active 0:09:45.880 --> 0:09:48.240 fixed income is managed in house. Wellington does manage one 0:09:48.280 --> 0:09:51.400 or two active mandates for us, still legacy mandates like 0:09:51.440 --> 0:09:55.560 Jenny May, et cetera. But really the difference being Vanguard 0:09:55.640 --> 0:09:58.679 chooses to manage funds in house where we have the 0:09:58.960 --> 0:10:02.319 talent and expertise to do so, and active fixed income. 0:10:02.360 --> 0:10:06.439 Our bond desk is tremendously deep in talent. Greg Davis, 0:10:06.440 --> 0:10:08.560 who I know you've had on the show before. He's great, 0:10:08.679 --> 0:10:11.839 Yes he is. He and his team have built out 0:10:11.840 --> 0:10:14.160 our fixed income capabilities over the years, and so we 0:10:14.240 --> 0:10:17.760 really are in a strong position to offer active fixed 0:10:17.760 --> 0:10:20.280 income across the range, and I think you'll see Vanguard 0:10:21.000 --> 0:10:24.640 leaning into our fixed income product lineup even more going forward. 0:10:24.920 --> 0:10:30.840 At risk of oversimplifying this, it always feels like active 0:10:30.880 --> 0:10:36.120 fixed income, you can run a screen and screen out 0:10:36.320 --> 0:10:41.920 riskier product, riskier bonds, lower quality bonds, and that immediately 0:10:42.120 --> 0:10:46.839 accrues to outperformance. For an active bond portfolio, you could 0:10:46.880 --> 0:10:50.880 develop screens to select certain quality bonds that you have, 0:10:50.960 --> 0:10:54.600 certain return characteristics that you like. Am I wrong? And 0:10:54.880 --> 0:10:57.439 I always feel like I'm making I'm dumbing it down 0:10:57.480 --> 0:11:00.200 too much. It feels like you can do more on 0:11:00.240 --> 0:11:05.000 the fixed income side actively and generate a return for 0:11:05.040 --> 0:11:08.079 your effort, whereas it's so much harder to do that 0:11:08.240 --> 0:11:09.320 on the equity side. 0:11:09.400 --> 0:11:11.480 I think that's fair, and I think Sarah Dever, who 0:11:11.520 --> 0:11:14.680 runs our fixed income shop at Vanguard now, would agree 0:11:14.679 --> 0:11:16.960 with you. I think there's a lot of opportunity that 0:11:17.000 --> 0:11:19.960 the team sees based on what's happening in the environment. 0:11:21.160 --> 0:11:23.680 And perhaps I don't know, I'm not in a position 0:11:23.720 --> 0:11:26.480 to say relative to active equity. I don't know if 0:11:26.480 --> 0:11:29.200 our active equity managers would agree, but I know that 0:11:29.240 --> 0:11:30.360 Sarah's team would agree. 0:11:30.720 --> 0:11:33.880 You mentioned that Vanguard is headquartered in Melvern, that it 0:11:33.960 --> 0:11:38.280 was a purposeful decision not to locate and headquarters in 0:11:38.360 --> 0:11:41.320 Boston and New York City. What are the advantages of that, 0:11:41.360 --> 0:11:42.920 How does that accrue to the culture. 0:11:43.360 --> 0:11:46.360 I do think it plays a big role in our culture, 0:11:46.480 --> 0:11:49.720 especially over decades. I think it's a big part of 0:11:50.160 --> 0:11:52.959 in some ways the talent we attract. There is a 0:11:53.080 --> 0:11:55.280 very purposeful decision on the part of most people in 0:11:55.320 --> 0:11:58.760 our industry to in many cases relocate their family to 0:11:59.360 --> 0:12:01.800 the suburbs of Philadelphia. Many of them are coming from 0:12:01.840 --> 0:12:04.280 New York or other areas, And you have to really 0:12:04.320 --> 0:12:06.560 buy into the mission and purpose of Vanguard and its 0:12:06.600 --> 0:12:10.080 company and its culture to you know, make a consequential 0:12:10.080 --> 0:12:14.880 decision like that. And I think it speaks to the 0:12:14.960 --> 0:12:19.120 ability for our mission and purpose to resonate with top 0:12:19.160 --> 0:12:20.120 talent in the industry. 0:12:20.320 --> 0:12:23.520 And to be fair, Philadelphia is a great American I 0:12:24.080 --> 0:12:26.920 I agree. Every time I've ever gone to Vanguard, I've 0:12:26.920 --> 0:12:30.079 always arranged a weekend in Philly. It's always a blast. 0:12:30.480 --> 0:12:33.760 The food is great, the history is great. It's not 0:12:34.120 --> 0:12:37.480 like nothing is New York. But I would put Philly 0:12:37.520 --> 0:12:41.600 in Boston, you know, absolutely on par in terms of, hey, 0:12:41.640 --> 0:12:43.200 we have this great city right here. 0:12:43.400 --> 0:12:46.240 I would agree with you, Barry, And I think from 0:12:46.240 --> 0:12:50.800 a Vanguard culture perspective, it also allowed us to really 0:12:50.840 --> 0:12:54.760 instill in you know, now twenty thousand crew around the globe, 0:12:54.800 --> 0:12:57.600 but those of us in Malvern for sure. This notion 0:12:57.679 --> 0:13:00.640 that our culture is really reflection more of Main Street 0:13:00.679 --> 0:13:03.400 than Wall Street. You kind of hear that around Vanguard 0:13:03.400 --> 0:13:05.160 every now and then, and it speaks to the clients 0:13:05.160 --> 0:13:07.040 that we serve and the way we think about product 0:13:07.040 --> 0:13:08.640 development and all of the rest of it. 0:13:08.840 --> 0:13:12.720 Huh, really interesting. So I mentioned Vanguard is about to 0:13:13.040 --> 0:13:16.360 celebrate its fiftieth anniversary. By the time the sales it's 0:13:16.400 --> 0:13:17.199 already happened. 0:13:17.240 --> 0:13:17.680 That's right. 0:13:17.960 --> 0:13:20.640 That's a nineteen seventy four was when it was launched. 0:13:20.640 --> 0:13:24.760 That's an amazing run fifty years. What does that mean 0:13:24.840 --> 0:13:27.200 to affirm the size of Vanguard? 0:13:27.840 --> 0:13:30.560 Oh, I think it's you know, an important milestone. But 0:13:31.360 --> 0:13:34.120 it is a reflection of everything that Vanguard has been 0:13:34.400 --> 0:13:38.240 over the last fifty years. I think, you know, our culture, 0:13:38.320 --> 0:13:41.560 our mission, our purpose has been incredibly consistent from the 0:13:41.600 --> 0:13:44.800 top down, you know, modeled by every leader you mentioned, 0:13:44.880 --> 0:13:47.760 the CEOs of Vanguard that you have already had the 0:13:47.760 --> 0:13:48.720 pleasure of talking to. 0:13:49.040 --> 0:13:49.959 Got to get the new guy in. 0:13:50.080 --> 0:13:51.960 Yeah, you got to get the new guy in. But 0:13:52.280 --> 0:13:55.960 you know, there is just a remarkable consistency across what 0:13:56.000 --> 0:13:58.520 we try to do for clients and how our leaders 0:13:58.559 --> 0:14:01.320 express that and how our crew you know, feel that 0:14:01.760 --> 0:14:03.839 and reflect that to our clients when they serve them 0:14:03.840 --> 0:14:04.280 every day. 0:14:04.520 --> 0:14:06.920 So I'm going to share a Bill McNabb's story, which 0:14:06.960 --> 0:14:09.200 I'm sure you experienced, and I want to just get 0:14:09.200 --> 0:14:13.280 your reaction to it. He told the story here during 0:14:13.280 --> 0:14:16.800 the financial crisis, he would occasionally plug into the phone 0:14:16.800 --> 0:14:21.360 system and listen to advisors speaking to clients, and not 0:14:21.400 --> 0:14:23.640 only were the clients freaked out, but you could hear 0:14:24.000 --> 0:14:27.120 people on the phone. They were a little nervous. All 0:14:27.160 --> 0:14:29.840 hands on deck, phone call, Hey, listen, We're going to 0:14:29.920 --> 0:14:33.080 come through this better than ever. Nobody's getting fired, nobody's 0:14:33.080 --> 0:14:36.160 getting laid off. Take a deep breath, go do your jobs. 0:14:36.680 --> 0:14:42.400 And suddenly everybody is just, you know, running on all cylinders. 0:14:42.840 --> 0:14:45.840 What was your experience during the financial crisis with McNab 0:14:45.840 --> 0:14:46.640 at the HELM. 0:14:46.760 --> 0:14:49.800 Very similar to what you just described and very consistent 0:14:49.880 --> 0:14:53.800 with how Vanguard approaches crisis. Really, I mean, the GFC 0:14:53.920 --> 0:14:56.600 was definitely qualified as a crisis for our firm in 0:14:56.640 --> 0:15:01.240 the industry and investors, and there was a calmness coming 0:15:01.280 --> 0:15:04.040 from Bill as the CEO, but also the rest of 0:15:04.080 --> 0:15:07.440 the leadership team and providing assurance to our crew. And 0:15:07.600 --> 0:15:11.520 You're right, there was, you know, an explicit assurance that 0:15:12.040 --> 0:15:15.760 we were going to keep calm and carry on and 0:15:15.920 --> 0:15:21.080 really importantly continue investing in our strategic priorities. Where you know, 0:15:21.160 --> 0:15:25.160 some firms were immediately pulling back after the GFC, Vanguard 0:15:25.200 --> 0:15:28.800 had the luxury of you know, we are playing a 0:15:28.800 --> 0:15:32.440 long game and continuing. I recall Bill and the leadership 0:15:32.440 --> 0:15:34.920 team expressing to our crew at the time, We're going 0:15:34.960 --> 0:15:37.280 to continue to invest in our strategic priorities. We're leaning 0:15:37.320 --> 0:15:40.080 in really and I think it had a very big 0:15:40.160 --> 0:15:41.240 calming effect on the car. 0:15:41.720 --> 0:15:44.560 That's how he told it. And I'm not surprised that 0:15:44.680 --> 0:15:48.520 at your reaction. I mentioned Jack Brennan, Bill mcnah have 0:15:48.560 --> 0:15:52.320 another rock steady guy that's whose hand you on on 0:15:52.360 --> 0:15:55.080 the tailer. You know, this guy isn't going to be 0:15:55.200 --> 0:16:00.000 rattled by a market sellof or a crisis, and that's 0:16:00.040 --> 0:16:05.120 that's really fascinating. My colleague Eric Belchunis wrote a column 0:16:05.480 --> 0:16:10.360 called the Vanguard Effect way back in twenty sixteen, and 0:16:10.440 --> 0:16:14.720 at the time he ran the numbers and said Vanguard's 0:16:14.960 --> 0:16:20.240 low fee approach has saved investors either directly or through 0:16:20.320 --> 0:16:24.760 indirect fee pressure a trillion dollars. That was almost ten 0:16:24.840 --> 0:16:27.560 years ago. I think we could bullpark it closer to 0:16:27.600 --> 0:16:32.160 two trillion dollars. Tell us about the focus on cost 0:16:32.880 --> 0:16:36.680 and how that's impacted investors and the entire industry. 0:16:37.000 --> 0:16:38.640 Yeah, I'm not going to check your math on that, 0:16:38.680 --> 0:16:42.600 but I'll buy Eric's and your your estimate there on 0:16:42.640 --> 0:16:45.440 what we've saved investors over time. And I think the 0:16:45.480 --> 0:16:49.320 focus on cost has been relentless, something that is in 0:16:49.360 --> 0:16:53.200 the fabric of the organization. We counsel our investors and 0:16:53.240 --> 0:16:55.760 our clients to focus on the things they can control, 0:16:55.840 --> 0:16:59.120 and you know, expense ratios, whether it's mutual funds or ETFs, 0:16:59.160 --> 0:17:02.080 these are things that are within an investor's control and 0:17:02.120 --> 0:17:04.160 it helps them keep more of their return. It's part 0:17:04.200 --> 0:17:07.600 of our whole, you know, portfolio construction methodology when we 0:17:07.640 --> 0:17:10.639 advise clients. It's one of the factors, not the only factor, 0:17:10.680 --> 0:17:13.560 and maybe not even the first factor, Barry, but certainly 0:17:13.640 --> 0:17:16.359 keeping cost low is something that Vanguard feels obligated to 0:17:16.400 --> 0:17:20.399 do for it's now fifty plus million investors around the world. Wow, 0:17:20.440 --> 0:17:25.600 and the Vanguard effect to use Eric's phrase is real. 0:17:25.680 --> 0:17:27.920 I mean we have seen that, particularly when we enter 0:17:28.000 --> 0:17:30.080 new markets outside the US. 0:17:30.720 --> 0:17:35.520 You see feed compression imediately when Vanguard shakes everybody's cage. 0:17:35.640 --> 0:17:35.920 Yes. 0:17:36.240 --> 0:17:39.480 So it's funny because Eric eventually writes the book the 0:17:39.480 --> 0:17:45.080 boggle effect. You mentioned. Cost isn't the first principle. I 0:17:45.280 --> 0:17:47.800 kind of get the sense then, of the things that 0:17:47.840 --> 0:17:52.000 you can control. It's being a long term investor and 0:17:52.040 --> 0:17:57.040 being a buy and hold investor. That wasn't popular when 0:17:57.160 --> 0:17:59.680 Vanguard launched in nineteen seventy four, was it. 0:18:00.160 --> 0:18:02.680 No, Sometimes it's still not even popular today. But we've 0:18:02.680 --> 0:18:06.720 been pretty clear and steadfast in our view that investors 0:18:06.720 --> 0:18:09.480 should have a goal. It should be intentional about what 0:18:09.480 --> 0:18:13.000 they're trying to achieve, having some balance and diversification, being 0:18:13.080 --> 0:18:16.520 thoughtful about how you construct a portfolio and perhaps getting 0:18:16.520 --> 0:18:18.760 the help of an advisor to do that if an 0:18:18.760 --> 0:18:22.400 investor would benefit from that, and really having the discipline 0:18:22.440 --> 0:18:24.919 to your point of sticking with it for the long term, 0:18:25.320 --> 0:18:28.800 and understanding what your personal risk tolerance is, your investment 0:18:28.840 --> 0:18:32.960 time horizon, and really thinking about how you're going to 0:18:33.000 --> 0:18:33.840 achieve those goals. 0:18:34.160 --> 0:18:36.160 So I want to ask you a question, and I'm 0:18:36.320 --> 0:18:39.760 very cognizant of the fact that you are no longer 0:18:39.800 --> 0:18:44.880 with Vanguard. We'll talk a little bit about where you've went. 0:18:45.840 --> 0:18:49.359 There has been in the industry as a whole, but 0:18:49.520 --> 0:18:56.720 surprisingly at Vanguard also a move towards some privates some alternatives. 0:18:57.480 --> 0:18:59.800 Tell us about this evolution. 0:18:59.760 --> 0:19:02.480 Yeah, I think it's an exciting one, both for the 0:19:02.480 --> 0:19:05.919 industry but also for Vanguard. As you mentioned, we began 0:19:06.160 --> 0:19:10.080 offering in twenty twenty. I think we began offering private 0:19:10.080 --> 0:19:14.040 equity fund to some of our retail investors, those that 0:19:14.040 --> 0:19:17.760 were qualified for it. It was a first for Vanguard, 0:19:17.760 --> 0:19:22.320 but I would say the notion of broadening access to 0:19:22.600 --> 0:19:25.680 different types of investments for mainstream investors is not a first. 0:19:25.720 --> 0:19:27.320 I mean, it's what we did with mutual funds, it's 0:19:27.359 --> 0:19:29.359 what we did with ETFs, it's what we endeavored to 0:19:29.359 --> 0:19:32.760 do with advice, and so private equity is part and 0:19:32.800 --> 0:19:35.600 parcel really of that advice offer for many of our 0:19:35.640 --> 0:19:38.320 advice clients. I think you'll see a lot more of that. 0:19:38.520 --> 0:19:42.399 In fact, there was subsequent to my leaving, there was 0:19:42.440 --> 0:19:45.919 a recent announcement that there is even another product that 0:19:45.960 --> 0:19:49.800 there'll be more information on. With partnering with Blackstone and Wellington, 0:19:50.640 --> 0:19:51.680 which is pretty exciting. 0:19:52.080 --> 0:19:55.679 And where did you end up shifting after twenty seven years. 0:19:56.320 --> 0:19:58.359 Well, I'm still making the shift, you know. I'm still 0:19:58.440 --> 0:20:01.840 kind of writing my next chapter, which is really exciting. 0:20:01.880 --> 0:20:06.200 But I will be joining Harborvest Partner's board next month. 0:20:06.520 --> 0:20:10.959 So May, first, you're at harbor Vest Vanguard, did I 0:20:11.000 --> 0:20:15.600 want to say Experiments which they've expanded, which was working 0:20:15.600 --> 0:20:20.120 with harbor Vest, which you know, maybe the layperson knows Vanguard, 0:20:20.160 --> 0:20:22.480 but they don't know harbor Vest. They're one of the 0:20:22.480 --> 0:20:24.919 biggest private equity in private credit shops out there, right, 0:20:24.960 --> 0:20:26.840 tell us what are you doing at Harborvest. 0:20:27.240 --> 0:20:30.320 Really excited to join harbor Vest in May. I'm going 0:20:30.359 --> 0:20:32.919 to be joining their board, really getting to know the 0:20:32.920 --> 0:20:35.200 firm in a different capacity. When I was at Vanguard, 0:20:35.240 --> 0:20:38.280 of course, in twenty twenty, we partnered with Harborvest. I 0:20:38.320 --> 0:20:42.400 oversaw the team that actually selected Harborvest among multiple managers 0:20:42.400 --> 0:20:46.160 that we considered for our first private equity offer for 0:20:46.280 --> 0:20:50.720 both retail and ocio clients at the time. So multiple 0:20:50.760 --> 0:20:55.000 series or vintages of that fund have progressed and Vanguard 0:20:55.040 --> 0:20:57.399 continues to work with Harborvest. And now I'm looking forward 0:20:57.440 --> 0:20:59.040 to working with them in a different capacity. 0:20:59.160 --> 0:21:02.080 So this raised this's a fascinating question. There has been 0:21:02.119 --> 0:21:06.320 a giant shift from public to private assets over the 0:21:06.359 --> 0:21:11.240 past you know, certainly decade or so. Not everybody can 0:21:11.280 --> 0:21:13.919 be in the top ten percent, as the joke goes, 0:21:15.119 --> 0:21:18.200 but it seems like there's almost a land grab going 0:21:18.240 --> 0:21:23.280 on for the retail investor thinking about a traditional sixty 0:21:23.359 --> 0:21:27.600 forty portfolio, why should they also be thinking about adding 0:21:27.680 --> 0:21:31.920 a slug of private debt or private equity to their portfolio. 0:21:32.240 --> 0:21:34.719 Yeah, I think it's one of the next things that 0:21:34.760 --> 0:21:38.280 we as an industry, not just vanguard, but more broadly, 0:21:38.560 --> 0:21:42.439 advisors have to help clients with retail clients in particular, 0:21:42.560 --> 0:21:45.480 who are used to, as you said, at conventional sixty 0:21:45.520 --> 0:21:49.800