(PUB) Morningstar FundInvestor

15

Morningstar FundInvestor

July 2 013

poor performance and huge outflows, and it’s likely AMG wanted to shed them.

much.” Echoing his sentiments from a recent video interview on Morningstar.com, Bogle argued that the index’s stake in Treasuries and agencies is dispropor- tionately high. Should it be 0% ? No, he said. But neither should it be 70% . On the role of Social Security: “It’s probably the best fixed-income position you’ll ever have.” With its steady payments and cost-of-living adjustments, Social Security is a key piece of retirees’ portfolios. But Bogle said we need to look at Social Security in the whole portfolio picture. If your investment port- folio is entirely fixed income, and Social Security is also playing that role in your holistic financial picture, is it too much fixed income? On occasions that he disagrees with Vanguard: “I don’t disagree with Vanguard, they disagree with me. They’re in a tough place,” he added. “Here’s this old guy who keeps saying what he thinks. Would he just shut the …” On the role of fund shareholder activism: “Corporate America needs a lot of cleanup.” Bogle estimated that the fund industry owns 35% of all stock in the U.S., and actually much more given that many of those same managers also run institutional money. “We control corporate America,” he said, “and corporate America needs a lot of cleanup, house cleanup. … If the shareholders don’t speak, nobody is left.” On public fund companies: Matthew 6 : 24 . How can corporations be fiduciaries to their shareholders and to their fundholders? Bogle got biblical, citing Matthew: No man can serve two masters, for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. On the strength of his convictions: “I’m too old to speak out on an issue I don’t vigorously believe in.”

Friess is the advisor for the $ 800 million, Neutral- rated Brandywine BRWIX , the $ 301 million, Neutral- rated Brandywine Blue BLUEX , and the $ 127 million, unrated Brandywine Advisors Midcap Growth BWAFX funds.

Fees are expected to slightly decline, and the funds will carry AMG ’s Managers Trust naming convention.

Bogle Weighs In on Key Issues Vanguard founder Jack Bogle expounded on a number of topics—from money market funds to the retire- ment system to the state of the fund industry—at the 25 th annual Morningstar Investment Conference. Never one to mince words, the grandfather of index- fund investing had no shortage of quotable moments. current U.S. retirement system, Bogle cited three areas of concern: underfunded Social Security (it can be fixed, he said; all that’s required is some political will); dramatically underfunded state and corporate pensions (they know their expected returns are unre- alistic, but they all say they’ll hire good managers); and overreliance on defined-contribution plans that aren’t strict enough to ensure success. On retirement: “We’re headed for three train wrecks.”
 Echoing language he’s used before to describe the On defined-contribution (for example, 401 (k)) plans: “We’ve taken a thrift plan and turned it into a retire- ment plan.” Bogle says the plans are too lenient on investors, giving them too many options to cash out. “We need to be much more strict on with- drawals,” he said.“There is too much ease of access. The system has too much flexibility.” Bogle further added that we should have a federal retirement board that determines eligibility for an investment firm to get into the retirement manage- ment system. “We need to get the costs out of the system and the discipline in,” he said.

On improvements in the fund industry: “Keep working.” œ

On government bonds: “Seventy percent of the [Barclays Aggregate] bond index in Treasuries is too