Passive attack

THE STORY of a quiet revolution in asset management begins with Jack Bogle. Actually, it starts in 1974 when Paul Samuelson, an economist and Nobel prizewinner, published an article in the Journal of Portfolio Management arguing that the bulk of mutual-fund managers should go out of business. Most failed to beat the market average and those that did could not be relied upon to repeat the trick. An archetype was required. Someone should set up a low-cost, low-churn fund that would do nothing more than hold the constituents of the S&P 500. Mr Bogle decided that Vanguard, the mutual-fund group he founded in 1975, should take up the challenge. His index fund was denounced on Wall Street as unAmerican. It received only a trickle of inflows. But by the time of Bogle’s death last year, Vanguard was one of the world’s biggest asset managers, largely on the strength of its index funds.