Magazine article American Banker

Verbatim: Globalization of the Mutual Fund Industry; Vanguard Group's Founder Examines Unique Strengths of U.S. Market

Magazine article American Banker

Verbatim: Globalization of the Mutual Fund Industry; Vanguard Group's Founder Examines Unique Strengths of U.S. Market

Article excerpt

As the mutual fund industry goes global, the United States brings something unique to the table-the world's largest stock market. John C. Bogle, the founder and senior chairman of Vanguard Group in Malvern, Pa., discussed the forces driving U.S. fund companies in a keynote speech at a seminar in Bermuda last week hosted by the International Bar Association. Here are some edited excerpts:

Despite some considerable hurdles, the globalization of the mutual fund industry is continuing and perhaps even accelerating.

It is part of-although, so far, only a very small part of-the nearexplosion of the globalization of the entire investment management business.

However, it is hardly a takeover of the rest of the world's investment managers by the powerhouse firms in the United States.

To the contrary, some of the very largest acquisitions turn that idea upside down: The takeover of Bankers Trust by Deutsche Bank (a combined $380 billion of assets managed); of Wells Fargo Nikko by Barclays Global Investors ($600 billion); of Kemper/Scudder by Zurich ($280 billion); and of Brimson by Swiss Bank Corp. ($380 billion).

Total assets managed by these four merged firms alone approach $2 trillion. For better or worse, we are truly living in the age of the giant global manager.

Traditional independent U.S. mutual fund complexes are also making waves across the Atlantic pond, although the Pacific pond remains, well, peaceful.

Aggressive fund marketers - including Fidelity, Merrill Lynch, Mellon/Dreyfus, and Morgan Stanley Dean Witter - are at various stages of global development, albeit in some cases rather tentatively.

While my design for Vanguard called for our firm to be at once both leading fund innovator and lagging fund marketer, Vanguard too has entered the fray, with incipient fund operations in Australia and Europe.

I warn skeptics that Vanguard may well become a formidable opponent in international waters.

The globalization that permeates the world of commerce and finance today has clearly impacted the mutual fund industry and will continue to do so. But U.S. fund managers come to the contest with a unique perspective.

First, our stock market - presently valued at $14 trillion - has by far the largest market capitalization in the world, 50% of the total and almost five times our nearest rival, Japan, with a 10%-plus share.

Perhaps unsurprisingly in the light of our great bull market, the U.S. mutual fund industry is also the giant of the globe. At $5.5 trillion, it has no serious rival. Runners-up Germany and France account for some $700 billion each, with Japan at $360 billion and the United Kingdom at $282 billion.

All told, the mutual funds of nations other than the United States total just $2.5 trillion, less than one-half of the U.S. total.

Six forces are driving the U.S. fund industry:

The sheer demographic opportunities offered abroad are huge.

The major industrialized nations have substantially older population profiles than the U. …

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