Exchange-Traded Funds at Vanguard (A) Case Solution & Answer

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This Case is aboutÂ FINANCIAL MARKETS

PUBLICATION DATE: June 10, 2011 PRODUCT #: 311134-PDF-ENG

Vanguard Group direction, headed by the CEO John Brennan, was reflecting on whether to establish exchange-traded funds (ETFs) in the early 2000. ETFs combined aspects of conventional mutual funds and closed-end funds.

The US ETF business had reached $36 billion in assets under management, growing rapidly over the past few years. Because ETFs were merely index-tracking goods, the biggest index mutual fund firm, Vanguard, had some prospective expertise in handling ETFs. Nevertheless, entering this marketplace would present additionally exceptional challenges for Vanguard.

Vanguard had a doctrine espousing low-turnover investing, while ETFs empowered short term trading. The organization would also be required to come up with a supply network for ETFs. Eventually, since the business was owned by Vanguard’s mutual fund investors, management considered whether present stockholders would reap the benefits of an ETF product launching.