Retiring Vanguard CIO Gus Sauter Looks Back

December 21, 2012

IU: Looking at the fiscal cliff, but in a broader frame of reference, does it preoccupy you at all that you are leaving at what appears to be somewhat of a precarious time?

Sauter: I guess you have to leave sometimes. You can look back over the last 15 years, and you’ve had about five or six of these events: the Asian contagion, the Russian debt crisis, the bursting of the tech bubble, the financial crisis, etc. Now we’ve got the fiscal cliff. I don’t plan to work for the rest of my life. And I don’t really know that I want to sit around and wait until everything is clearly resolved. In fact, you know, it’s just never been quite obvious to me that everything is taken care of.

IU: How about telling us what you consider your legacy at Vanguard to be.

Sauter: There are several things that I point to. The first one was growing our equity group. I was hired 25 years ago as head of the equity group. And, at the time, we had one index fund. Our goal was to increase our capabilities to develop active equity quant funds, and also further our index capabilities. We started with $1.2 billion the day I was hired. And, of course, two weeks later, the crash of 1987 hit and then we had $800 million. Fortunately, that turned around. Actually later today, we are celebrating our $1 trillion mark in the quantitative equity group.

IU: Congratulations.

Sauter: Thank you. It’s been really an awful lot of fun along the way. I would say also our foray into ETFs was something that I had an opportunity to play a part in. We were a little late to the game, but I think we found our niche. It’s a very meaningful part of our business.

The two other things I would point to is being appointed chief investment officer nine and a half years ago, and being given the responsibility for the fixed-income group. We’ve modified the way we manage portfolios to more of a specialist structure rather than a generalist structure and that’s going to serve us extremely well over time. And finally, we used to manage our regions around the world in silos. When I had responsibility for portfolio management in the U.S., I had oversight over the investment group in Europe, but we had independent management in Australia. We decided several years ago to go truly global. My division was among the first to really go fully global, which was an interesting challenge in its own, and rewarding as well.

IU: Do you feel like your mission has been accomplished in terms of what your plan was when you came on Vanguard?

Sauter: I’ve had just phenomenal opportunities, both in my department and contributing on our senior staff as well. But I do think all of us have certain capabilities. And I think, quite honestly, I've done what I can do. My capabilities were probably more suited towards growing a group rather than managing a mature group. And now, we are a mature organization. I certainly believe that [incoming CIO] Tim Buckley’s capabilities are better for managing a mature organization than my personal capabilities. Tim will take it to the next level.

There are some personal reasons as well. My parents are both elderly, and I want to try to spend more time with them. I still have time to do some other things that hopefully will be meaningful. I don’t really think of it as retiring. I think I'm moving on to some new challenges.


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