15
Morningstar FundInvestor
July 2
013
poor performance and huge outflows, and it’s likely
AMG
wanted to shed them.
Friess is the advisor for the $
800
million, Neutral-
rated
Brandywine
BRWIX
, the $
301
million, Neutral-
rated
Brandywine Blue
BLUEX
, and the $
127
million, unrated
Brandywine Advisors Midcap
Growth
BWAFX
funds.
Fees are expected to slightly decline, and the funds
will carry
AMG
’s Managers Trust naming convention.
Bogle Weighs In on Key Issues
Vanguard founder Jack Bogle expounded on a number
of topics—from money market funds to the retire-
ment system to the state of the fund industry—at the
25
th annual Morningstar Investment Conference.
Never one to mince words, the grandfather of index-
fund investing had no shortage of quotable moments.
On retirement:
“We’re headed for three train wrecks.”
Echoing language he’s used before to describe the
current U.S. retirement system, Bogle cited three
areas of concern: underfunded Social Security (it can
be fixed, he said; all that’s required is some political
will); dramatically underfunded state and corporate
pensions (they know their expected returns are unre-
alistic, but they all say they’ll hire good managers);
and overreliance on defined-contribution plans that
aren’t strict enough to ensure success.
On defined-contribution (for example,
401
(k)) plans:
“We’ve taken a thrift plan and turned it into a retire-
ment plan.” Bogle says the plans are too lenient
on investors, giving them too many options to cash
out. “We need to be much more strict on with-
drawals,” he said.“There is too much ease of access.
The system has too much flexibility.”
Bogle further added that we should have a federal
retirement board that determines eligibility for an
investment firm to get into the retirement manage-
ment system. “We need to get the costs out of the
system and the discipline in,” he said.
On government bonds:
“Seventy percent of the
[Barclays Aggregate] bond index in Treasuries is too
much.” Echoing his sentiments from a recent video
interview on Morningstar.com, Bogle argued that the
index’s stake in Treasuries and agencies is dispropor-
tionately high. Should it be
0%
? No, he said. But
neither should it be
70%
.
On the role of Social Security:
“It’s probably the best
fixed-income position you’ll ever have.” With its
steady payments and cost-of-living adjustments,
Social Security is a key piece of retirees’ portfolios.
But Bogle said we need to look at Social Security in
the whole portfolio picture. If your investment port-
folio is entirely fixed income, and Social Security is
also playing that role in your holistic financial picture,
is it too much fixed income?
On occasions that he disagrees with Vanguard:
“I don’t disagree with Vanguard, they disagree with
me. They’re in a tough place,” he added. “Here’s
this old guy who keeps saying what he thinks. Would
he just shut the …”
On the strength of his convictions:
“I’m too old to
speak out on an issue I don’t vigorously believe in.”
On the role of fund shareholder activism:
“Corporate
America needs a lot of cleanup.” Bogle estimated that
the fund industry owns
35%
of all stock in the U.S.,
and actually much more given that many of those
same managers also run institutional money. “We
control corporate America,” he said, “and corporate
America needs a lot of cleanup, house cleanup. … If
the shareholders don’t speak, nobody is left.”
On public fund companies:
Matthew
6
:
24
. How can
corporations be fiduciaries to their shareholders and
to their fundholders? Bogle got biblical, citing
Matthew: No man can serve two masters, for either
he will hate the one, and love the other; or else he
will hold to the one, and despise the other.
On improvements in the fund industry:
“Keep
working.”
œ
