YouSaid · the spoken record

Bill McNabb

lines on the record: 145
first: 2015-05-15
most recent: 2015-05-15
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Well, in that particular time, we were a lot littler firm than we are today, and it was a pretty significant purchase. But again, it sounds really simplistic, but if you do the right thing, usually in the end, it's a good strategy.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Asked for a better story because it really underscored what we believe, which is take care of the existing investor and the next investor will find you if you have a reputation for doing that.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Comes on the current investors, and in that particular case, we were in a declining yield environment, so it was going to also diminish the yield of the portfolio pretty dramatically. So our portfolio manager Said no, we're not going to accept the money. It actually did end up on the front page of the Wall Street Journal. The guy went to the SEC. He went to every major news publication, and it turned out to be actually one of the best things that we couldn't have.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, ETFs, we look at ETFs as just another product structure, frankly. And what it's allowed us to do is to take the indexing story, the low cost story, to a much broader group of investors. And because of the way ETFs work for many advisors, especially if you're on a brokerage platform, it's just a lot easier to implement than traditional funds. It does not mean that we endorse day trading or minute by minute trading of ETFs. In fact, just the opposite. We believe very strongly that long-term investing is the way to really accumulate wealth.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, again, we'd like to see some guardrails put in place to protect people from the front running. Again, I've never been a fan that, you know, latency should give you an advantage versus somebody who's a mile further away. It doesn't really make any logical sense. I don't think it's making markets better. But I do think conceptually you got to be careful around being too critical or, you know, Undoing everything, or the markets aren't going to be knit together the way they need to be knitted together. I mean, I'm not sure anybody would design the markets with a blank sheet of paper the way they are. But since we've had, really since the late 90s, when we've seen this tremendous expansion of pools of trading, we've really seen a pretty, it's a very different market than what I started out.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So net net, it has broad costs down. And in the way you can look at this is the history of our index funds, and our traders have actually done this, and we can see that the cost of trading has been reduced dramatically and you see that in terms of our tracking error and so forth. And again, the data are actually overwhelming over the last 15 years. It doesn't mean that there aren't practices within the high-frequency trading community that we don't, you know, that we're not critical of. But one of the things during sort of the flash crash aftermath, there was a lot of let's just ban high frequency trading. And what we were very afraid of is if you pull that thread, not quite clear what would be left. Because the high frequency trading actually does knit together this very granular, disparate market that we have.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's a very fair point. I would say, and again, we have a lot of respect for what Rob and his team have done. And look, you know, you. When you look at the data, it's so time dependent. And you may get a little reduction in volatility. Depending when you start your period and when you end it, I'm not convinced that over very long market cycles it really matters. And to me, then it becomes the cost, get the lowest cost index fund you can. And that's really what's going to drive performance.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“To us, if you're going to truly index, you want to take advantage of the cost side. And that's why market cap makes sense. Now, if you want to make an active bet, you have a view that value is cheap today versus growth, then you could argue that a factor-based fund can be a really efficient way of doing that. And as we think that through, I think that is going to perhaps influence our product development in the future because it could very well be a good way for a manager to make an advisor in particular like yourself make that kind of bet if that's something that you wanted to do.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Indexers by definition add up to the market minus cost. And so it's a zero sum game at the end of the day. And that's why indexing works. It's just lower cost. It's not that markets are more efficient or whatever. When you're doing factor-based stuff, you are making a bet against that broad market. And for every winner, there's a loser because in the end it all adds up to the market. And so...”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, two things there. So, on the market cap index, the reason we're so passionate about that is it's just math at the end of the day. And, you know, if you add up everybody in the world, all investors, let's just use the US for now to keep it simple. You add up to the market, and that is a market-capped market. If you take all your active managers and put them in a box and then you take all your passive managers and put them in a box, there's really no third category, right? It used to be individuals were a big But today that's de minimis. All your active managers by definition have to add up to the market. And so it's a market minus cost.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“All of the value oriented investors were scratching their head saying, is value investing dead because large cap growth was dominating. And so you go through these market cycles where different factors seem to work and they work for fairly long periods of time and then they don't. So to me, it's a bet. And as long as the investor knows that they're taking a bet, they're either overexposed to value or they're overexposed to growth or some combination. Then I think it can be a legitimate low cost way for somebody to make that investment bet. And in a sense, instead of investing in a traditional active growth manager, if you're buying a factor-based fund that's growth-oriented, you're hopefully doing it at a much lower cost, and you're getting the same factor exposure that you would from that traditional growth manager.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so very fair point and implicit question there. So a couple of things we had growth in value index funds a long time, which you could argue were sort of a version of. Some of these factor-based funds is the way I think about them. So look, I don't have a problem with a concept as long as you understand what you're investing in. Smart Beta is one of the great marketing terms of all time. It implies that it's a better way of indexing. To me, all it is is you're taking an active bet and you're betting on either a single factor or a series of factors. And you're betting that those factors are going to outperform the broad market over some particular period of time. And right now, you know, mid-cap, you know, mid-cap value over the last 15 years has been a really good place to be. But, you know, 1999.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The team gets very nervous when I talk about it as well because I've been a real promoter of the concept. In fact, they're really happy that they're officially launched since I've pre-announced the launch about three different times by accident.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, we had some existing client business move over. So it's up to about $17 or $18 billion. So it's a pretty big thing already.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And it would be really high quality. And so we're very excited about this. I think it's going to redefine for a certain type of client how advice is provided. And, you know, it's not going to supplant the whole advisor world, but it gives small investors in particular a really professional choice, which they don't have today”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we call it personal advisor services. And the idea here was we had been running an advisory service for clients with a million dollars, and we'd actually dropped the minimum to half a million. But, you know, it's a big number for a lot of people. And so the challenge we put out to our team was, can we take the same quality that we're providing our millionaire clients? Can we take it all the way down to a $50,000 client? And so we invested tens of millions of dollars in the technology. We trained an awful lot of people because what we're doing is really a combination of technology with a personal touch. And the stark objective was to get this to a price where all in, so advice fee plus the underlying product would be roughly in the half a percentage point range.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So again, in general, I think not a good idea. These are instruments that derivatives in general are incredibly helpful in de-risking portfolios and managing subtle changes to a portfolio. But what you see in a lot of these is a lot of leverage or a lot of implicit leverage and not clear to me that the investors really understand the risks they're taking.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a compensation scheme, as far as I'm concerned. You know, people are just figuring out how to get paid a lot for not adding a lot of value.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, predicting which way interest rates are going to go and currencies are going to go, really difficult to do. Haven't seen more than a couple human beings do it, and it's a question of whether they're lucky or whether they're actually doing it well. So we're big fans of define what you're trying to do in the bond market and stick to it.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So again, everything in theory can have its place, but in general, what we're seeing in the liquid alt space is not all that attractive from an investor perspective. It's really expensive, and I'm not sure it's providing any kind of real value add.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think it says a couple things. One, our investors were listening to all of the things we've been trying to put forth over the years that you have to think long term. Two, we have a lot of 401k investors, and they were saving for retirements long term, so don't react.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think what it allowed us to do was to be really well positioned as the markets began to turn and activity began to pick up. We were firing on all cylinders and we were ready to serve clients. We actually kept our investment in the business going during this period.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it was really important to project that because there were certainly lots of commentary out there that the world was ending as we knew it. We didn't see it that way, but we knew it was going to be rough. And then the third thing we did, which again will seem tactical, but it was really important. We said to our people, don't worry about your jobs. You all have jobs, and you're here to serve the client and stop worrying about nobody's going to lose their job over this. We want you focused on being here for the client. And boy, that set a tone inside. I also think it really helped with a client interactions because people had confidence when they were talking to clients.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so we did three really important things. One, on the money fund side, we knew we were in really good shape. And we got engaged with the SEC in terms of beginning to move the reforms forward right from the get-go. Second, in terms of our investors, most of our competitors actually stopped talking to the press and stop going out and meeting with clients. At least that's what we heard. We were very vocal and very visible. And we were very clear that we didn't know how this was going to all unfold, but that you had to step back and again sort of go back to basic. And what we saw was it had a real calming influence on our investors. And I did a webcast probably October of 2009 or 2008. And I think it was downloaded 100,000 times in 24 hours. It was a remarkable. Number”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so reserve fund broke the dollar, and the question was would anybody else, you know, we believed very strongly that our funds were incredibly well positioned. Our prime fund, which is supposed to be in commercial paper CDs and so forth, we were 65% government treasury at that point. So it was super safe. We had been very worried about what was going on in the housing market. But there was still, you were watching the rest of the industry struggle with it. You know, the second thing was we were watching our investors behavior and listening to them call and ask us, what's happening and, you know, what should we do? That was the biggest question. What should we do? And then the third thing, we actually had our staff say, and what's this mean to all of us? Because as you may recall, it was Armageddon and Financial Services and people were laying thousands of workers off.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“There were sort of three levels of challenges. So the first was pretty tactical but big. The whole money fund industry was under fire. And what were we going to do with the money market funds that we were managing and how was the treasury's rules and the intervention that was occurring? So that was a big topic.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“In a word, it was frightening, to be very honest. It was at the same time, it probably will be one of the defining parts of my career in that the team that I worked with, we got a chance to experience things. I hope no one else ever gets to experience. And we got a chance to, I think, influence events a little bit and hopefully move things in a good direction for our clients. It was amazing to watch it all unfold.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so first of all, I don't agree with the premise, but even if you did, indexing is still a very small percentage of the world's market cap. So in the US, the big change in mutual funds has been indexing is now risen to be about 35% of U.S. mutual funds. But mutual funds on the equity side only represent about 25% of the equity market. And in the institutional side, it's a much smaller percentage. So indexing is still less than 20% overall in the US. And if you go abroad, it's a couple percentage points. Really tiny. So there's a huge opportunity for it to become much more significant.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And he Tremendous, tremendous person. And I think the genius was to say, if this idea is good enough for a sophisticated institution, why isn't it good enough for the average small investor? And so we took the indexing concept and turned it into a mutual fund, which no one had done.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So when Vanguard was founded formally in 1975, Jack Bogle and the team, I think, correctly identified that cost was a differentiator. So even before indexing, we were talking about cost. Now, we weren't particularly low cost at that point, but we were aspiring to be so. This idea about indexing seemed to be the perfect manifestation of a low-cost, very efficient way to invest. And you had the Wells phenomenon on the pension side. You had Bert Malkiel's random walk down Wall Street, which was written around the same time. You had Charlie Ellis's winning the losers game, which was written around the same time.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I couldn't agree more. You know, at the end of the day, it's define what you're trying to do. And then we want to be able to help you get there.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I would say these four principles have been present since our founding, and we had talked about them in different ways. But about four or five years ago, as we were kind of rethinking our message to the world, it became clear to us that we needed to distill it in even simpler English for people and really make it stark. And I think these do that. People look at it and they say, boy, it's not complicated. And I say, yeah, but how many people don't follow this? And, you know, for me, especially the goal setting, this is the place where I see most investors miss. They don't have very clear, well-defined goals. And you need to know that if you're going to construct an appropriate portfolio.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I think it's again, we feel great about what's been going on, but Andy Grove is one of my favorite executives, and he has this phrase only the paranoid survive. And I really believe that. So the minute any complacency starts to show itself at Vanguard, we get very skittish.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, again, this was dubbed as we enter new markets, you immediately see prices fall. In fact, I think what's happening here is our competitors are getting a little bit smarter rather than waiting for us to take a lot of market share. They're actually trying to meet us more quickly. A couple of my colleagues at Vanguard have said, you know, are you worried about it? And I said, not really, because at the end of the day, first of all, we're built to do this every day. And we're built to get better and better. But second of all, it's great for investors. So if investors have more choice low cost, then we've got to get smarter and more innovative and quicker as to how we compete on that level.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, when you look at all the work that's been done in Morningstar did a pretty seminal piece two, three years ago where they broke all funds into quartiles and the highest expense quartile had the worst performance and the lowest expense quartile had the best performance and the performance was very consistent and persistent. And so it just reinforced a notion that we'd had. Cost is the one thing you can control. It's not like other consumer goods where you pay more, you in theory get more. In investing, that has not been the case.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think our focus on cost and doing the right thing for investors has resonated at a level that even we are surprised by. And it's been very gratifying, to say the least. But we think we're, and again, all humility aside, we think we're winning for the right reasons. We're not out there trying to promote something that we're not.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, a couple. You know, Jack Brennan, who was my predecessor, he and I struck up a pretty good friendship early on. And, you know, he ended up being a little bit of a mentor before I went to work for him directly. There was another fellow, Jim Gately, who, one of our great leaders at Vanguard, who I would tell you, I learned a ton from him. He was a guy who had been at Prudential Asset Management and had bought a lot of boutiques. And he brought with him a worldliness that I had never experienced before and really taught me what it was like to be a professional.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“kind of made that go away yeah and and really you know what happened as interest rates came down GICs were a great deal you could basically when I was investing in them you could get an 8 or 9% yield and you could keep a constant dollar price because it was an insurance contract so you know basically investors were getting three-year bonds with a money market like price And so for the 401k investor, it was a godsend. And it's these plans were just beginning. This was really a very popular asset class.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I've been with the bank for three years and I was working basically in a group that was undoing bad leverage buyouts. And we were sort of the precursor to what became the private equity desk farther down the road. And it was really fascinating work. I love the work. I actually like the team I was on. But I was a little dissatisfied with the bank's overall strategy and some of the cultural aspects. And my wife was from Philly. I'd gone to grad school there. So we thought about going back. And I got this call from this upstart firm. They were looking to hire a GIC product manager. I had no idea what that was. It's before the internet. It's guaranteed investment contracts, which were early on the biggest asset class in 401k plans.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I then went to Wharton, got a great education there, spent a couple years at what's now JPMorgan Chase, and then found my way back to Vanguard.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, are you fluent in Latin? Not anymore. I think back in the day I was reasonably good at it, but I think the real thing was it was a private school. I could coach three sports. So I was looked at as a very cheap asset. You know, I could do a lot of things for not a lot of money. It was a recession when I graduated in 1979. Oh, sure. I remember. Yeah. So any kind of work was good work as far as I was concerned. But those couple years of teaching actually were really, in some ways, very instrumental in terms of shaping the way I think about the world.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there was a little bit of a side tour there after I graduated from Dartmouth, I think much to my mom's chagrin. Instead of coming to work in New York, I ended up going to teach first-year Latin at a boys school. First year?”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's right. And we have a saying that Jack promoted a lot in the early days that strategy follows structure. So everything we do had to reflect that structure, which basically means just put the investor first and everything you do. And that culture really permeated the organization right from the get-go. And the other thing Jack did a really good job of was the internal culture, which was, for lack of a better phrase, lived by the golden rule. And so there really not a lot of hierarchy at Vanguard. Certainly, you know, we pay our best performing portfolio managers higher than those who aren't. And you have all kinds of different compensation arrangements. But at the end of the day, everybody treats each other peer-to-peer. And it doesn't matter what your role is. And, you know, that makes it very different than most firms where there's often an all-star kind of cast to it.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think the great thing Jack did was at the beginning of the firm, and I was there a few years after the founding, was he created this corporate structure, which is very different than anything else. As you know, we're owned by our funds and therefore our investors.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Coming up next month. It was really a remarkable turn of good luck. I was working for a firm here, which is now JP Morgan Chase, and got a call to go to Vanguard. And Vanguard was this little tiny mutual fund firm in 1986. And I went down, loved it, and sometimes better to be lucky than smart.”
2015-05-15 · Masters in Business · Vanguard CEO Bill McNabb: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source