Vanguard Management Group, CEO of John Brennan, was wondering if he start Exchange Traded Funds (ETFs) in spring 2000. ETFs, first created in the early 1990s, combines aspects of traditional mutual funds and closed-end funds. The U.S. ETF industry had reached $ 36 billion in assets under management, is growing rapidly in the last few years. Because ETFs were only index tracking products, Vanguard, the largest index fund company, had some potential expertise in managing ETFs …. Read more »

Vanguard Management Group, CEO of John Brennan, was wondering if he start Exchange Traded Funds (ETFs) in spring 2000. ETFs, first created in the early 1990s, combines aspects of traditional mutual funds and closed-end funds. The U.S. ETF industry had reached $ 36 billion in assets under management, is growing rapidly in the last few years. Because ETFs were only index tracking products, Vanguard, the largest index fund company, had some potential expertise in managing ETFs. However, in this market would also present unique challenges for Vanguard. Vanguard had a philosophy partisanship invest with low turnover, while ETFs enabled short-term trading. The company would also need to develop a distribution network for ETFs. Finally, since Vanguard mutual fund investors in the Company’s possession, management evaluate whether existing shareholders would benefit from an ETF launch.
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from
Robert C. Pozen,
Steven Vickers
Source: HBS Premier Case Collection
12 pages.
Release Date: 10 June 2011. Prod #: 311134-PDF-ENG
Exchange Traded Funds at Vanguard (A) HBR case solution