Why is Vanguard moving towards active management after suggesting?
Vanguard is not moving toward asset management, Vanguard is, and long has been, one of the biggest active management fund sponsors in the industry. Before there was an index 500 fund Vanguard was, essentially, Wellington Management. Jack Bogle wanted to separate the funds from the asset management company by internalizing all the back office functions, reducing cost and enabling the funds to have leverage, no longer dependent on Wellington for back office. Active management has been part of the fund line up from the start it took a while for indexing to catch on and multiply. Vanguards advantage is active management is scale and cost. It reduces back office cost for its active funds to a minimum and drives a hard bargain on management fees with external managers. Some of its actively managed funds are category killers look at PrimeCap and Capital Opportunity funds (both managed by PrimeCap). They are consistent outperformers in the large cap category and low cost by comparison to their competition.