BlackRock and McKinsey veteran Salim Ramji is the first outsider tapped for the top spot in Vanguard Group's 49-year history, suggesting the Vanguard board is open to change, sources said — however incremental that change may be.
Ramji’s experience at BlackRock, where he was global head of iShares and index investing, as well as his earlier run at McKinsey as the head of that firm's asset and wealth management practice, could prove helpful in addressing some of the areas where Vanguard has faced challenges in recent years, Vanguard watchers said.
Vanguard on May 14 named Ramji as its next CEO, succeeding Tim Buckley, whose departure was announced by the $8.7 trillion manager in February. Ramji left BlackRock — the $10.47 trillion giant — earlier this year.
The incoming CEO’s priorities at Vanguard could include figuring out how to build Vanguard’s global footprint and strengthen its technology, said Jim McCaughan, Miami Beach, Fla.-based U.S. practice leader with asset management strategic consultancy Indefi.
McCaughan added that "Vanguard may also be looking to him (Ramji) to lead a systems upgrade — a recognized strength of BlackRock."
George Wilbanks, managing partner at Stamford, Conn.-based executive search firm Wilbanks Partners, said Ramji’s selection to helm Vanguard is in line with recent trends: elevating well-rounded executives with “multidimensional skills” in areas such as strategy and technology for the top spots at asset management firms. That’s in contrast to earlier generations of leadership, dominated by investment or sales professionals.
It’s a natural evolution — wanting a senior executive willing to take a more creative, “out of the box” approach to running the business better, Wilbanks said.
Door open to crypto
Analysts were divided on whether Ramji’s appointment, effective July 8, could impact Vanguard’s stance on one high-profile issue — the firm’s refusal to consider bitcoin and other cryptocurrency investment vehicles that BlackRock has become a dominant player in over the past year.
While BlackRock expanded its investment lineup to include cryptocurrency, “I don’t think those products are logical for Vanguard to come to market with in the near future,” said Todd Rosenbluth, New York-based head of research at TMX VettaFi, a data and analytics provider.
Ramji will bring a fresh perspective to the job as Vanguard’s chief but “I expect we’re going to see a lot of continuity in terms of priorities and the products that are in focus,” Rosenbluth said.
However, Eric Balchunas, senior ETF analyst with Bloomberg Intelligence, said the possibility of Vanguard changing its views on crypto shouldn’t be ruled out. “I think the door is open now,” in light of Ramji’s pro-crypto stance.
Ramji won’t do anything radical but he’s likely to “push the company” a bit and obviously the board wouldn’t have hired him if they “didn’t want him to be him,” Balchunas said.
Meanwhile, the issue of potential cultural conflicts shouldn’t be exaggerated, some sources said. Ramji is “definitely a Vanguard-ian type of guy,” said Balchunas, who noted that he’s interviewed Ramji a number of times over the years. “He truly believes in indexing. He knows that back and forth. And he’s also a big ETF guy” — a product Vanguard sees as its main delivery vehicle for low-cost investing, Balchunas said.
Indefi's McCaughan doesn't expect to see Ramji changing that low-fee philosophy, he said.
Ramji’s experiences at BlackRock — a firm with a leading technology offering and extensive global footprint — could prove useful for Vanguard, which effectively pulled the plug in recent years on efforts to extend its business to markets such as China and Australia.
Ramji’s experience at a money management giant with a strong record in international markets could make him the executive to solve Vanguard’s overseas puzzle, Rosenbluth said. Likewise, BlackRock has been a leader in supporting institutional investors with index and ETF strategies — potentially a greater focus for Vanguard going forward as well, he said.
Ramji’s role in building BlackRock’s presence in the wealth management marketplace, spurring ETF adoption there, is likely another area Vanguard will look to pursue, Balchunas said. BlackRock had $3.75 trillion in ETF assets under management as of March 31. Vanguard had $2.51 trillion in ETF AUM as of Dec. 31, according to P&I data.
Vanguard watchers say while the firm's culture, with its almost cult-like devotion to providing a fair deal for individual investors, can be directly traced back to Founder Jack Bogle, that hasn't left the firm immune to change.
The view of Vanguard as a temple built by Bogle, with tenets considered sacred and unchangeable, may be overdone in parts, Balchunas said, noting that Vanguard’s board over the decades has extended the firm’s business into areas Bogle dismissed as unnecessary — such as smart beta ETFs.
Palash Ghosh contributed to this story.
