Bogle noted that between 1982 and 2017, the S&P 500 enjoyed a 50-fold cumulative gain, but very few mutual funds offered comparable returns to their shareholders. At the same time, asset managers have enjoyed higher margins through harnessing economies of scale, but little if any of those economies were passed on to mutual fund shareholders.
According to Bogle, between 1951 and 2016, the total mutual fund fees and expenses collected by asset managers increased from $20 million to $110 billion, a 5,600-fold increase, while total AUM increased by 5,400 fold -- thus as asset managers have successfully scaled up their businesses, investors have gradually paid more for access to active mutual funds and all of the benefits of scale have been enjoyed by the owners of the asset managers, not their mutual fund shareholders.
Bogle proposed that this conflict of interest be resolved through “fiduciary asset management” that puts the interest of the mutual fund investors ahead of the public ownership of the conglomerate.
“The necessary resolution of this issue would be to roll back conglomerate ownership, came to grips with the public shareholder issue, and at last make it clear that the interests of mutual fund investors must come first -- it will not be an easy battle,” said Bogle.
His appearance at the Morningstar Investment Conference, which occurred by video, may never have happened if another industry group had not snubbed Bogle. The Vanguard founder originally appealed to the Investment Company Institute (ICI), requesting to speak at the group’s upcoming General Membership Meeting.
Bogle, who previously served as chairman of the ICI board of directors, said that he has not been invited to speak at an ICI conference in more than 30 years, despite the fact that Vanguard is the group’s largest member and dues payer. Bogle’s request to speak this year was rejected by ICI’s leadership, citing a desire to keep the peace between competing asset managers and investment philosophies.
“The things that I had to say were, I thought, worth hearing by those who care, and who care deeply, about the future of this industry -- the industry that I have loved for two-thirds of a century,” said Bogle. “Rejected by ICI, I asked Morningstar for an opportunity to speak at their annual Investment Conference. They immediately opened a slot for me.”