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CNBC PRO Talks

Here's what Warren Buffett's hero Jack Bogle is most worried about in the markets right now


Jack Bogle, founder of the Vanguard group and creator of the first index fund, told CNBC PRO he is worried that just three firms — Vanguard, BlackRock and State Street — dominate the passive investing game. He believes more firms need to embrace the passive philosophy and reduce the influence of these companies, including his own.

He believes more firms need to embrace the passive philosophy and reduce the influence of these companies, including his own.

"I've also been in this business so long that I know that when everything looks sweet and easy, you better be worried 'cause the big guy hidden in the back of the room — you can't see him — huge, strapping guy carrying a sledgehammer and just when you think everything is going fine he takes that sledgehammer back and hits you in the nape of the neck," Bogle told Mike Santoli in the exclusive interview.

Overall, Bogle remains concerned about Wall Street's constant habit of putting itself before its customers and that active management mutual fund firms which are also publicly traded will continue to suffer from this conflict of interest.

"The industry structure I think is going to have to change in a more mutual direction where the client comes first and not the investment manager and particularly not the financial conglomerates that own 30 of the 50 largest mutual fund companies," Bogle said.

Warren Buffett called Bogle a "hero" to him in his annual letter released this year, writing, "If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle."

On this comment from the "Oracle of Omaha," Bogle said, "When a hero like Warren calls me a hero, there may be an element of truth in it, but one takes these things with a grain of salt."

Bogle, 87, also discusses in this nearly 20 minute sit-down:

  • How much bigger passive investing can get (It's 22 percent of the market now).
  • The origin of his index fund idea.
  • Why some ETFs don't belong in 401(k)s.
  • What returns investors can expect over the next decade

To view this interview, you must be a CNBC PRO subscriber.