You can file this under the heading that index investing is now a commodity as you’ve read here, here, here, here, and here. All Vanguard is exposed to man-made indexes, and with this move looks to vacuum up some more fees for its own survival against BlackRock.
Whether it’s good or bad, Dawn Lim discusses the acquisition here:
Vanguard Group is buying JustInvest LLC, a smaller investing upstart that helps financial advisers build personalized portfolios.
The deal marks the first ever corporate acquisition by the world’s second-largest asset manager since Vanguard’s start in the 1970s. It brings together companies with radically different businesses: Investment giant Vanguard is best known for funds that track indexes. JustInvest provides tools for investors and advisers to build bespoke portfolios.
The purchase gives Vanguard another way to deepen ties with advisers. Vanguard oversees some $7.9 trillion in assets. Of that, about $3 trillion has already come into Vanguard through advisers, brokerages and other such middlemen.
Vanguard announced its agreement to buy JustInvest on Tuesday. Vanguard will gain over a dozen new employees and roughly $1 billion in assets managed by JustInvest through the purchase. It couldn’t be learned how much Vanguard is paying for the company.
Financial advisers using JustInvest’s software can, for example, quickly screen out oil polluters, take bigger positions in gun makers or automate the task of optimizing after-tax returns. Each client’s investments can then be managed separately. JustInvest’s legal name is one word, however the firm more commonly goes by Just Invest as two words.
The acquisition is part of Vanguard Chief Executive Tim Buckley’s push to reshape the Malvern, Pa., company beyond an index firm. Founded by index pioneer Jack Bogle, Vanguard revolutionized how America invests with funds that track markets at a fraction of what stock-and-bond pickers charge. But index funds are becoming an ever cheaper commodity, putting pressure on Vanguard to find other ways to differentiate itself from rivals.
Mr. Buckley wants to reach investors who aren’t content to just track indexes and want their money invested in line with their beliefs and needs. Since he rose to CEO in 2018, he has pushed Vanguard to expand robo advice offerings and offer private equity.
In 2019, he expressed curiosity about direct indexing, the business of creating personalized indexes for investors’ specific needs. At a news briefing, he said that direct indexing was “a technology to watch,” but cautioned it has to be low-cost before it is widely adopted.
Since 2020, Vanguard has worked with Just Invest to pilot technology for a small group of advisers.
E.J. Smith - Your Survival Guy
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