Morningstar Discussion about The State of Vanguard in 2025 (Highlights)

As a follow-up to my thoughts on Should I Stay with Vanguard? and their recent expense ratio drop announcement, I recently listened to this 30-minute Morningstar video with Daniel Sotiroff and Susan Dziubinski about the current state of Vanguard in 2025. I think it provided some good additional context. Here are some highlights and brief commentary.

Vanguard funds brought in another net $222 billion last year, with the ETFs up $306 billion but the mutual funds losing $84 billion. The Vanguard S&P 500 ETF brought in $117 billion all by itself. Vanguard holds over $10 trillion in assets total. Overall, they are not struggling at all.

However, with the mutual funds following the industry trends and still losing assets, mutual fund holders should be wary of them being forced to sell positions and create capital gains distributions. This includes foremost their actively-managed mutual funds but possibly eventually their Target Retirement 20XX Funds.

Vanguard is rolling out a lot of new bond ETFs. Vanguard Core Tax-Exempt Bond ETF (VCRM), a broad US muni-bond ETF. Vanguard Short Duration Tax-Exempt Bond ETF (VSDM), a short-term US muni-bond ETF. Both ETFs launched November 2024.

Coming in 2025 are the low-cost index ETFs that hold T-Bills: Vanguard 0-3 Month Treasury Bill ETF (VBIL) and the Vanguard Ultra-Short Treasury ETF (VGUS). Then there is Vanguard Short Duration Bond ETF (VSDB), which is actively-managed and will hold short-term bonds across multiple bond sectors.

Vanguard is splitting off their Wealth and Advice division entirely. It will now be completely separate from the Personal Investors division, showing how important it is to the current company. Heading this division will be Joanna Rotenberg, most recently employed at the wealth advice division of Fidelity Investments. As an everyday Vanguard customer, I’m constantly seeing their advice ads to meet with an advisor, but I’m still waiting for them to actually make the product useful. With all these new executives, I guess I’ll have to give them at least another year or two to figure it out. Count me as hopeful on this one.

The new CEO from BlackRock, Salim Ramji, has also stated a desire to focus on helping retires to create income from their portfolios. The drawdown period is another big problem in the industry, which I don’t think anyone else has solved yet either. In fact, creating a stable paycheck is even harder than just growing your portfolio over time and accepting the volatility. Count me as skeptical on this front.

There is an upcoming virtual Joint Special Meeting of Shareholders on February 26, 2025. Sounds like a good example of “Oh, the fund holders own the company and get a say in things!”, but after looking at the fund proxy vote , it looks like the usual nothing-burger. There’s only one real question on the proxy vote card (the second one is “You gonna go to the meeting?”). They’ve already picked the replacement trustees that they want; it’s not like it’s an election where people are running with different platforms. You basically vote for them all, or withhold your vote against them all. Given the huge institutional holders, I don’t even know if every retail investor voted “against all” that it would actually prevent any of their chosen picks from joining the board.

Image credit to Canva AI “HMS Vanguard on hopeful seas at sunrise”