“Big Money in Boston”: The Commercialization
of the Mutual Fund Industry

Abstract

Over the course of his six-decade-plus career, Vanguard founder John C. Bogle has witnessed—and been an active participant in—sweeping changes in the mutual fund industry. In the early days, “Boston Trustees” usually managed a single fund, with a focus on the long-term, prudent investment, and stewardship. Today the industry is dominated by giant financial conglomerates running fund supermarkets, focused on short-term, more aggressive strategies, and salesmanship. Four major changes drove this change in the mutual fund culture: 1) The industry’s incredible growth. 2) Aggressive, high-risk investment strategies. 3) Product proliferation. And 4) conglomeratization. Yet one innovation stood firm against that rising tide—the index fund. In recent years, investor cash inflows have poured into “passively-managed” index funds while “activelymanaged” equity funds have endured substantial outflows.