Bloomberg Audio Studios, podcasts, radio news. We welcome now our TV and radio audiences worldwide, and pleased to say we're joined by Vanguard CEO Salem Ramji in an exclusive conversation, Slim. Great to have you with us. So we all saw the red to be here, Katie, Thank you. We saw the ripple effects from Monday's move. And your average fee now is just seven basis points across your lineup. The industry average for contexts forty four basis points. Set the scene for us.
Why now, well, you know, in one sense, I will say Monday was a pretty joyous day here at Vanguard, and it was joyous because it really is a reaffirmation of our business model where we're owned by our clients and so as a result, as we gain scale economies here at the company, we share those back with our clients. And that's not just been true since Monday, It's been true since nineteen seventy five, since when we founded the company.
And so this was continuing on a two thousand price cuts I think by our tally as of last week now it's twenty one hundred and sixty eight price cuts, and that's been part of the proposition that investors have had with Vanguard for decades.
And so Salim, I think I'm asking on part of your competitors, but also investors as well, when I asked how low can thees go? You're at seven basis points right now. Where is the possible floor here?
Well, you know, we don't price products as loss leaders. We're not looking to you know, price abnormally low in order to get somebody into a higher cost other service. And so we really look at it across the board in terms of our scale economies. We want to deliver great quality and great performance. And I think that the thing that sometimes gets lost in the mix. Obviously, index prices have been coming down for quite time, led by us over the past several decades. But sometimes it gets
confused that we were all about index. We're actually about active and index. And really, if you go back to our origins, what Bogel was against was high fees, and so active management at a low fee can really outperform over the long term if delivered with the right quality. That was Bogel's hypothesis in the seventies and eighties, And if you look at our track record even just in something like active fixed income. The empirical evidence backs up
that hypothesis that he had way back then. Ninety one percent of our active fixed income outperforms its peers over the past ten years. And one of the reasons why is because we price it at just over ten basis
points and so at a very low fee. And you know, when you speak to our fixed income team, to Sarah Devereux our CIO and our teams who run our fixed income, part of the reason they're able to outperform is they have a much lower headwind from higher fees, and so they're able to take risks in a much better and more disciplined way. And so what this is really about is not just about delivering high quality index management, but it's really about delivering high quality investment management at a
very low fee. And I think whether you're looking at active fixed income or whether you're looking at index fixed income or index equities, that's really what we've been.
About, right Well, Selim, you make the point that a lot of people probably think of Vanguard and they don't think of active and you do, have, of course active funds out there, but it's a pretty small percentage of your overall lineup, especially if you take a look at the ETF side of things. Should we expect to see more active fund launches from you?
Yeah, you know, our active management the first Vanguard funds are actually active funds if you go back to the seventies and both we manage our active fixed income within Vanguard. We have a whole range of partners subadvisors that we work with for our fundamental act of equities, and they're unified by the principle of being high quality at a
low price. And yeah, Katie, you already have seen us doing a lot more in active ETFs, and I think you've seen that pick up over the past several months, and I hope and expect that will continue over the next you know, this year.
And next year, all right, So we'll keep an eye out for that. You were talking a little bit about, of course, how the ownership structure works at Vanguard. How basically all a lot of the extra cash, the extra assets that you generate are funneled towards these fee cuts. But I'm curious from where you sit, how do you balance lowering fees versus investing in the business. What does that decision tree look like.
Yeah, it's something we do very carefully here, and you know this week is all about our fee cuts and giving back to our clients in the form of lower fees. We've also stepped up our investments in things like technology. That's something that really began about two three years ago and is continuing this year and next year. Because we're always trying to balance making sure that we've got high quality products at a low cost and we're delivering the
right level of service to clients. We're investing in newer technologies to make our investing even more efficient, to make our client interfaces even more efficient. So that's always a balancing act here at Vanguard, just like it isn't many companies in terms of how do we think for the near term and how do we think for the medium to longer term. But I'd say one of the beauties
of Vanguard. I think part of the original genius of Vanguard is that when we've got a surplus, after we've looked at the important investments we need to make back in things like technology, the way we give back to our owners is through lower fees. And I think that's the Vanguard effect that you've been seeing for decades all across the company.
Yeah, that Vanguard effect obviously a good news story for your investors, maybe not for your competitors. But I do want to talk about the future, and I want to talk specifically about private markets and alts. One of the big take stories that we have on the terminal right now is about PIMCO and fears that PIMCO might be falling behind in alts because you take a look at the industry right now and a lot of your peers have invested heavily in alts in privates to scale up there.
What is your plan when it comes to those areas and do you fear that you're a little bit behind right now?
Well one of the again one of the great benefits of our business model, if you go back to the origin, we had sub advisors. You know, for example, at our beginning we are and are still sub advised by Wellington Management, which is still our largest sub advisor today. And so where we don't have capabilities within kind of Vanguard, we've
long had an ability to partner with other firms. To date, we've generally done in fundamental active equities, but we can do it in things like private markets, and there's lots of discussions and explorations we have underway to see what's possible. But our north star is always about what's right for our clients, and it's making sure that whatever it is we do inactive in index ourselves or with others, that we keep in mind that we're about simplicity, we're about
low cost, and we're about long term returns. And I think that there are constructs that will allow private markets to fit in that. But that's really part of the exploration that we're doing because whatever it is we do, we want to do it the Vanguard way, and we want to do it in a way that's well suited to our client base, which is really looking to us for a certain set of things that we've consistently delivered over the years.
All right, Seleem got to leave it there. Really appreciate you taking the time. That is Vanguard's CEO Salem ramj