2019-03-01 Money

MARCH 2019 MONEY.COM (^73)
the press (which fund companies aggressively court) when they hit
a hot streak. But in his popular personal finance books, including
Common Sense on Mutual Funds andBogle on Mutual Funds, Bogle
used industry data to show that very few funds are able to maintain
outperformance for long.
“What we wanted from the very beginning,” Bogle recalled,
“even before the first index fund started, I said, ‘We want funds
with relative predictability. Don’t give anyone a wonderful surprise
on the upside, and don’t give anyone bad surprises on the down-
side.’ ” That thinking grew partly out of his own experience running
the Wellington fund company, when, by his own account, he allowed
it to chase the “go-go” bull market of the late 1960s, with badly
disappointing results.
CRUSADER FOR INVESTORS
BOGLE’S LONG CAREER COINCIDED with explosive growth in the money
management industry. He wrote his Princeton University senior
thesis on the fund industry in 1951, when it ran about $3 billion.
Funds now have $18 trillion under management and, with the
decline in traditional pensions, have become a cornerstone of
Americans’ retirement. But Bogle noted with frustration that the
average expense ratio generally rose as the industry grew, instead
of being cut down by competition. (It did finally begin to decline
after 2000, thanks in part to index funds.) “We thought mutual fund
managers would be able to do better, and I think they let us down
badly,” said Bogle.
After 2000—and especially in the wake of the 2008 financial
crisis—Bogle expanded his criticism of the
fund industry to corporate America at large.
He saw CEOs increasingly aiming to please
only short-term shareholders—often fund
managers looking for quick returns. “We’ve
had quite enough speculation and not
enough investment,” he said. Bogle worried
that the rise of funds as intermediaries
meant that few investors felt the responsi-
bilities of a business owner. “The way I
calculate it, 99% of what we do in this
industry is people trading with one another,
with a gain only to the middleman,” said
Bogle in 2015.
Bogle was not an activist but an entrepre-
neur. He could say that “I think capitalism
has failed us in the broader sense, and I
think capitalism has to change.” Yet he still
believed that efficiently managed, low-cost
funds could give investors and savers what
he called their “fair share” in the growth of
public companies. Jack Bogle did not think
very highly of the financial industry; ironi-
cally, that’s what helped him recognize and
popularize one of finance’s best ideas.
Bogle was dubbed “Saint Jack” for his zealous defense
of low-cost investing and critiques of the fund industry.
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