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Vanguard vs. BlackRock: Battle for World’s Largest Investment Manager

Vanguard vs. BlackRock: Battle for World’s Largest Investment Manager

  • Vanguard is on pace to have $8.94T assets under management by 2022
  • Gregory Davis was promoted to be Chief Investment Officer in 2017

BlackRock (BLK +0.30%) and Vanguard are the two largest investment managers in the world. Respectively, they finished 2017 with $6.29 trillion and $4.94 trillion in assets under management. Over the past eight years, BlackRock has grown at a rate of eight percent while Vanguard has grown at about 15%, according to Pensions & Investments. If both companies maintain constant growth rates, Vanguard will pass BlackRock as the world’s largest investment manager by 2022. What’s Gregory Davis’ strategy to keep Vanguard on pace for this title?

Why This Matters: Vanguard has grown to a massive scale by popularizing index investing. This enables passive investing to ensure long term returns. Gregory Davis appears to be taking an “if it’s not broke, don’t fix it” approach to managing Vanguard’s investments. “We still believe a combo of stocks, bonds and cash is the appropriate mix for investment goals,” said Davis. In early 2018 he forecasted Vanguard would see 4.5 - 6.5 percent growth in the equity markets at a global level, for the U.S. he forecasted 3 - 5 percent growth. In the bond market Vanguard sees lower returns between 2-3 percent.

While the firm’s general investment strategy remains relatively constant, Davis does believe investors should have more exposure to international markets rather than being U.S. centric. This global perspective was most likely impacted by his serving as Vanguard’s CIO for Asia-Pacific and Director of Vanguard Investments Australia.

What could prevent Vanguard from remaining on pace? Federal Reserve actions or a selloff in the markets are two examples that could knock it off course.

Situational Awareness: Vanguard is rolling out a new product called Vanguard Personal Advisor Service. Through this platform Vanguard will be able to further reduce the price investors pay to place their capital in the company. Look to see how this further grows the assets Vanguard manages.

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