Vanguard Poised for Another Record Year as Index Investing Gains

  • Almost $200 billion poured into firm this year through August
  • Active managers struggling to compete as clients defect

Vanguard Group Inc. is on track for another record year of inflows as investors increasingly shun stock pickers.

The world’s largest mutual fund company attracted $198.4 billion in the first eight months of this year, a 19 percent increase from the same period a year earlier, spokesman John Woerth said in an e-mail Thursday. In 2015, Vanguard lured $236.1 billion, the most ever for the company. 

Vanguard is benefiting as investors, frustrated by the lackluster performance and high fees charged by active managers, are pouring money into low-cost funds that mimic indexes, which is Vanguard’s specialty. Investors pulled $130.9 billion from active and exchange-traded funds through July 31, while adding $241.8 billion to passive funds, according to data from Morningstar Inc.

“Low cost investing has never been more in vogue,” said Lawrence Glazer, who helps manage $2 billion at Mayflower Advisors in Boston.

Vanguard had $3.3 trillion in U.S. mutual funds and exchange-traded funds as of July 31, 22 percent of the entire market, Morningstar data show. American Funds had a market share of 8.4 percent and Fidelity Investments had 8.3 percent.

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