Vanguard founder Bogle criticizes fund industry

BOSTON, May 19 (BestGrowthStock) – John Bogle, the founder of
mutual fund powerhouse Vanguard Group, said the industry has
strayed too far from its roots and would be better served if
financial conglomerates were not allowed to own mutual funds.

Known for his candor in speaking about the $12 trillion
industry he helped shape by pioneering low-cost index
investing, Bogle said many managers are being seduced by big
paychecks that cloud any ability to do right by their
investors.

“This used to be an industry based on stewardship and not
on salesmanship,” Bogle said at the CFA Institute’s annual
meeting in Boston. “Marketing and salesmanship should not be
how the industry is focused.”

Bogle complained that many mutual fund companies appear to
be overly focused on their own compensation incentives and need
to increase revenue, prompting them to raise assets by selling
a stream of unneeded new funds.

The only way to avoid conflicts between managers and
investors would be a rule that “financial conglomerates cannot
own mutual fund companies,” Bogle said. “No man can serve two
masters,” he added.

Out of the 40 largest mutual fund firms, only eight are
privately held including Vanguard, Fidelity Investments and
Capital Research and Management. Top publicly traded mutual
fund managers include Legg Mason (LM.N: ), Franklin Resources
(BEN.N: ) and Janus Capital Group (JNS.N: ).

Money

(Reporting by Svea Herbst-Bayliss; editing by Maureen Bavdek)

Vanguard founder Bogle criticizes fund industry