Vanguard has unquestionably been a boon to the world, helping batter down costs for everyone. But its rampant growth raises some thorny questions. Here's our big read ft.com/content/941405… and a short thread. 
Even I am astonished at just how dominant Vanguard is becoming. BlackRock remains the world's biggest asset manager, but it is a broader and more international company, and Vanguard is catching up.
This is mostly because it OWNS the US mutual fund market - the biggest in the world. It how has a market share of over 25%. Here are its flows last year versus its rivals.
Just to make it even more explicit: Vanguard has alone taken in OVER HALF of the $3.6tn net inflows the entire US mutual fund industry has seen over the past decade.
This is plainly the consequence of its unique business model. Vanguard is owned by its own funds, so it can lower fees far more aggressively than its rivals, and that leads to more growth and further cost cuts - a virtuous circle.
But because it is more concentrated in the US, and more concentrated in equities, it will become an increasingly dominant shareholder, with huge power over companies. Even not exercising this power is a choice with huge consequences.
I actually have a lot of sympathy with the predicament Vanguard and BlackRock find themselves in, as an increasing focal point for big public policy issues.
They are under rising pressure to be active shareholders who lean more aggressively on companies over a host of issues. But the danger is that they at some point do TOO much, and there is a backlash.
Some things might seem uncontroversial - like ensuring more boardroom diversity - but as they accumulate corporate power activists of various stripes will increasingly target them. Even lobbyists will start to focus on them.
Threading the needle between being responsible stewards of capital, and not abusing the corporate power that they are now accumulating, is going to be one of the biggest challenges Vanguard (and BlackRock) faces in the coming decade.
I'd argue that it is also a huge and under-appreciated broad public policy issue, especially at a time of increasing scrutiny of concentrating corporate power. Good paper on the subject here: corpgov.law.harvard.edu/wp-content/upl…
To end the not-so-short thread, here is a gif i made of inflows into index funds.
