VANGUARD GROUP INC

Vanguard was established in 1975 by founder John C. Bogle as a mutual funds company. Its core purpose is to “take a stand for all investors, to treat them fairly, and to give them the best chance for investment success” and its competitive strategy is to cut costs to shareholders by redirecting net profits from economies of scale, eliminating sales commissions and keeping operating expenses low. Vanguard is owned by its funds, which, in turn, are owned by the investors. This client-owned structure allows Vanguard to lower costs and raise profits on fund returns. One of Vanguard’s most important strategies was the introduction of index mutual funds, giving the company a further competitive edge in cost efficiency. At the company’s onset, it grew mostly through word of mouth as clients spread the news about Vanguard’s services. By the 1980s, Vanguard had grown large enough to be able to provide services for retirement plans, institutions, and financial advisors. The increased cash flow allowed Vanguard to steadily lower the fund expense ratio from 0.89% at its inception to 0.38% by 1990 and to 0.18% by 2014. In 1996, Vanguard began to expand to locations outside the United States, first opening offices in Melbourne, Australia and later to London, Paris, Toronto, Singapore, and Tokyo, among other international locations. In the same year, John J. Brennan became Vanguard’s second CEO. From then on to 2003, Vanguard launched a series of new options such as the 529 college-saving plans, Admiral Shares, ETFs, and Target Retirement Funds, lowering fund costs even further and diversifying its line of products. In 2008, F. William McNabb III succeeded Brennan to become the third CEO. In 2013, Vanguard passed the 2 trillion assets mark and, just one year later, in 2014 passed the 3 trillion mark. Today Vanguard offers a variety of low-cost mutual funds such as the HealthCare Index Adm and FTSE Social Index Inv, ETFs such as Health Care and Small-Cap Growth, advice, and other related services that cater to over 20 million clients ranging from the individual investor to the corporate investor.