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Net Net: Promoting innovation and managing change

Vanguard 'king of the hill' thanks to...Buffett

Source: Vanguard | Facebook

Investors may be warming up to the stock market, but they're taking the safe way in.

Passively managed funds are all the rage now, with market participants enjoying their low cost, high liquidity and tax advantages.

No outfit has benefited more from that approach than Jack Bogle's Vanguard Group, which has seen its total assets under management swell to nearly $3 trillion thanks to the allure of the firm's funds that track market indexes rather than make individual stock picks, according to a Wall Street Journal report.

That low-risk approach has gotten the imprimatur of none other than legendary investor Warren Buffett, who gave the firm his imprimatur a few months back. In his annual letter to shareholders, he advised them to follow the directions in his will, which mandates that his $66 billion fortune be divided with 10 percent in short-term government debt and the rest "in a very low-cost S&P 500 index fund. (I suggest Vanguard's.)."

Since then, the cash has been rolling in as part of a trend toward index investing that has helped other big names in the field such as BlackRock and Dimensional Fund Advisors.

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"They are the king of the hill," Michael Rawson, an analyst at Morningstar, told the Journal, which noted that Vanguard's Total Stock Market Index is the largest mutual fund in the world.

Vanguard also holds a prominent place in the exchange-traded fund space, ranking third in assets with $395 billion, behind BlackRock and State Street, according to Its ETF ranks fourth largest with just over $45 billion in assets.

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