John C. Bogle, the late founder of Vanguard Group, suggested people “avoid Bitcoin like the plague.” Scott Iles/Bloomberg via Getty Images
In 2017, legendary investor Jack Bogle warned people to “avoid Bitcoin like the plague.” More than six years later, Vanguard Group Inc. is still… It is riling the cryptocurrency world by adhering to its late founder’s conservative investment approach.
Amid the euphoria triggered by the long-awaited debut of the first Bitcoin exchange-traded funds in the United States, Vanguard caused a stir last week with its apparent decision to decline to offer new ETFs on its giant trading platform.
#BoycottVanguard began trending on X, accumulating thousands of posts, as users pledged to withdraw their funds from the asset management giant.
Vanguard’s response? To double. The company, which controls $8.6 trillion, not only dumped spot Bitcoin products, but also pulled Bitcoin funds backed by futures contracts from its platform as well. This means that it now does not offer any cryptocurrency products at all, unlike its counterparts.
The saga speaks to Vanguard’s longstanding investment philosophy, one that goes back to Bogle himself. The Valley Forge, Pennsylvania, company was founded by the money management icon in 1975 on the premise of investing in stocks and bonds — assets that generate cash flows, dividends and interest payments — while avoiding commodities.
Vanguard has traditionally shied away from the latter option – seeing it as lacking in intrinsic value and internal rate of return – with Bogle dismissing investing in commodities as “complete speculation”. Modern-day Vanguard still follows this gospel closely nearly half a century later, with just one commodity box out of more than 400 on offer worldwide.
“It is not at all surprising that Vanguard would take this position because there are ample precedents for it and, more importantly, it is consistent with its long-standing investment principles,” said Ben Johnson, head of client solutions at Morningstar Inc.
This discipline extends beyond Vanguard’s own lineup of mutual funds and ETFs and even its brokerage arm as well. While commodity ETFs are available for trading, the company pulled “highly speculative and highly complex” leveraged and inverse products from its platform in 2019.
Even as billions flow into newly launched spot Bitcoin ETFs, Vanguard has no plans to offer any cryptocurrency-related products, a company spokesperson said.
“I don’t need gatekeepers”
Vanguard’s rejection of cryptocurrencies stands in stark contrast to its industry peers. BlackRock, Fidelity and Invesco Ltd. all launched bitcoin exchange-traded funds last week, while centuries-old State Street offers fund services for several products.
Meanwhile, Franklin Templeton did his best to market his Bitcoin fund, placing laser eyes on Benjamin Franklin’s X avatar and the invitation For investors to add Bitcoin to 60/40 portfolios.
Traditional finance’s embrace of Bitcoin ETFs has only fueled online vitriol against Vanguard.
“We don’t need gatekeepers to tell us how to invest,” says one of the X’s more than 100 posts 2600 likes. “I’ll go where I and my money are treated better,” reads another sign Screenshot Who requested the distribution of the Vanguard plan.
However, the #BoycottVanguard movement is unlikely to make a dent in the company’s business, according to industry expert Dave Nadig.
“They’re not going to lose a single 401k plan because of this, and a very small number of brokerage clients,” Nadig said.
Meanwhile, money continues to flow into the Vanguard lineup. Nearly $4.4 billion was added to Vanguard’s stable of 84 ETFs last week alone, after attracting $157 billion in 2023, according to Bloomberg data, more than any other asset manager. Vanguard has increased its share of the $8 trillion ETF market for 21 straight years, putting it on the cusp of dethroning industry leader BlackRock.
Despite drawing scorn from the cryptocurrency community, Vanguard — with its ultra-low fees and unique corporate structure in which fund investors elect board members and actually own the company — still attracts something of a following online. On the Bogleheads.org forum, any posts related to “investment strategies based on securities or physical assets that have no fundamental value or expected negative long-term returns” are banned (hint: cryptocurrencies).
While avoiding crypto ETFs could be a long-term risk if it ultimately alienates younger investors, it represents a small risk compared to Vanguard’s loyal base, according to Eric Balchunas of Bloomberg Intelligence.
“To be honest, Vanguard can’t keep the money out,” said Balchunas, senior ETF analyst at Bloomberg Intelligence and author of “Vanguard.” Bogle effect. “Even if Vanguard said, ‘Please stop investing with us,’ it wouldn’t do anything. They have built up a lot of trust and goodwill with their clients.