After the establishment of the Swiss Bogleheads’ Local Chapter, the newly born Chapter had the great pleasure to welcome Andreas Zingg, Head of Switzerland and Liechtenstein at Vanguard, for its first virtual meeting on November 25, 2021.
Andreas Zingg gave a glimpse of the Vanguard operations in Switzerland and passed on the solid investment principles and investment philosophy of J. Bogle. Here is a short transcript that could be useful to you if you are interested to strengthen your investment approach
Culture and structure at Vanguard
J. Bogle, the founder of Vanguard, wanted to give the investor a fair share of economic performance. Until today. Vanguard mission has been to take a stand for all investors, to treat them fairly, and to give them the best chance for investment success. At Vanguard, this mission should not only remain on paper, but the company genuinely intends to live this mission.
The culture differentiates from other companies who want to be client focused, but who cannot due to the inherent conflict of interests that prevent the Asset Management industry to put clients first. Vanguard aims to have the interests of clients at heart. The very particular structure of the US-based group enables a long-term approach and a strong client focus.
The company is profit-oriented. However, it does not generate profits for shareholders but for its investors/clients. There is always a tradeoff between clients and shareholders (who do you serve first). In the Asset Management world, Vanguard has this unique structure: Mutual funds’ owners legally own Vanguard in the US (you become an owner by buying a fund). This philosophy has also lived in Europe, where Vanguard treats its investors as if they were owners. After Vanguard has covered its costs, it gives the rest back to investors in the form of a reduction of fees and new services.
Beside client focus, low cost investing and long-term thinking are key principles, because Vanguard will not follow short-term commercial trends or most profitable approaches (such as synthetic ETF) if it is not the right thing to do for clients.
In 1976, J. Bogle introduced the first index to retail investor, enabling diversified low cost investing. The initial success and trust gained enabled economies of scale: Since many costs are fixed and revenues derive from AuMs, Vanguard was able to continually cut the fees and invest in new services. In 2008, Vanguard opened its Zurich office. It then experienced a strong and exclusively organic growth. In Switzerland, Vanguard distributes mostly passive, but also actively managed fund at attractive prices to equity and fixed-income investors. Swiss domiciled investors have access to a lower range of services than in the US, but Vanguard will introduce new offerings over time. Unlike in the United States with direct subscription with Vanguard, the best exposure to Vanguard for Swiss investors is through their own brokers.
Key investment principles
Andreas Zingg also described the key principles for investing success as embedded in the Vanguard culture:
- Goals: Defining goals clearly and being realistic about ways to achieve them can help protect investors from common mistakes;
- Balance: Developing a suitable asset allocation using broadly diversified fund will favor the investors;
- Cost: One basis point less cost equals on basis point more performance, so investors should “control what can be controlled and forget the rest”;
- Discipline: “Stay the course” is key. We have to assume that we are bad investors and follow our feelings with potential bad outcomes; investors should stick to your strategy and only rebalance when strictly necessary or on a regular schedule.
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