With technology still its Achilles heel, Vanguard makes Charlotte, N.C., a 'hub' for software engineers, purchasing 700,000-square-foot campus to house 2,400 with 'room to grow'
The $117 million purchase in exurbia may finally resolve one of Vanguard's biggest shortfalls -- lagging tech from the boombox and cassette tape era.
8 min read- Vanguard invests $117M in a Charlotte campus to consolidate 2,400 employees and foster tech innovation.
- Move aims to address Vanguard's persistent technology shortcomings and improve user experience.
- New hires in Charlotte will focus on cloud engineering and user experience roles.
- Analysts caution that the real estate investment alone won't solve Vanguard's tech issues.
Brooke's Note: If you were the CEO of a beloved company that grows its AUM by a trillion dollars a year but gets no love for its online software experience, what would you do? Band-Aid measures have not quieted critics, and therein lies the problem. Neither engineers, user-experience experts nor investing experts alone can tackle the problem without working together. It's simple math. You buy a "Google-style campus" where engineers and financial types alike abound, bring them all together in one place and let the magic happen. Vanguard is not saying that CEO Tim Buckley is making this move for this reason, but everything points in that direction. It's a worthy objective. A company like Vanguard with trust, scale and sweet technology all under one brand would be an enterprise with a very bright future in asset- and wealth-management. And, yes, it just bought a legit tech campus, albeit one that sat empty for two years after its previous owner backed out.
The Vanguard Group has 2,400 staff semi-scattered around Charlotte, N.C., in rented office space, but they will soon be consolidated into one property, with room to add up to 3,600, as it confirms the city as a potential technology “hub.”
The Malvern, Pa., asset manager of $7.6 trillion, with 20,000 staff nationally, picked up a 700,000-square-foot office building complex for a reported $117 million earlier this month.
Vanguard is currently advertising for 51 new hires in Charlotte, down from 58 last week, according to its website.
Most of the Vanguard job openings are for cloud engineers, user experience specialists and the like, suggesting a technology hub may be in its future. See; Vanguard CEO says: 'We are a technology company' and hints strongly that robo-for-RIAs may be in the offing
"The campus will support the working arrangements for our more than 2,400 crew members in the Charlotte region, with room to grow if needed," Vanguard spokeswoman Alyssa Thornton told the Philadelphia Business Journal.
"[Most] importantly, we look forward to more in-office collaboration as a result of bringing our crew together onto one campus," she added. See: Vanguard set to launch geek-spirited think tank in heart of Philly as its 'robo' (that really isn't) hits $47 billion of AUM
No panacea
Yet, Vanguard is unlikely to solve its long-running technology issues simply by the real estate move, says Vanguard analyst Jeff De Maso, founder and editor of the Independent Vanguard Advisor.
“I hope the proximity to the Research Triangle benefits Vanguard's technology. But I doubt that will be a magic bullet,” he says in an email exchange from Brooklyn, N.Y.
"For me to say, 'Yes, I think Vanguard's turned the corner,' I'd need to go a while without snafus, like delaying year-end statements or flubbing a bond fund's month-end distribution.
I'd like to see some of the "smaller" stuff get cleaned up, too," he adds.
Today, Vanguard spends at least $1 billion a year on technology. But the financial giant is frequently in the news for glitches and crashes, and its software is reportedly known for poor user experience. See: Vanguard's website snafu.
Purpose-driven
Research Triangle is so named because it's framed by three research universities — Duke, the University of North Carolina (UNC), Chapel Hill, and North Carolina State.
Vanguard CEO says: 'We are a technology company' and hints strongly that robo-for-RIAs may be in the offing
Charlotte is not exactly a next-door neighbor. It's actually about 175 miles southwest and anchored by a sole UNC satellite campus.
The city is better known as a Southeast financial center. It's home to Bank of America, Fidelity Investments, LPL Financial, AdvisorEngine, Private Wealth Systems and Canopy, among other financial firms. It's also home to the NFL's Carolina Panthers.
Vanguard declined to answer a number of RIABiz questions, including about what kinds of staff will be hired for the location.
In a statement, Jennifer Manry, Vanguard co-lead for Charlotte and principal of its corporate IT systems, employed several "buzzy" phrases in a statement more commonly associated with Google than Vanguard.
“We’re excited to continue to enrich their workplace experience through a brand-new, modernized campus that maximizes the value of in-person collaboration and reinforces our commitment to Charlotte as a hub for purpose-driven talent,” she stated.
Opportunity knocks
The location is a place Vanguard can build its engineering staff, and create an atmosphere with all the requisite Google-style campus staples. See: Vanguard makes mockery of 'digital' myth by reporting $1.3 trillion after its new mobile app's panned debut -- then makes tech-y Tara Bunch a director
Expected to open in 2025, Vanguard's new facility includes office space, “dedicated collaboration spaces,” a conference center, a “full-service cafeteria,” walking areas, EV charging stations and a gym, according to a release.
Vanguard's new offices – an eight-minute drive from the UNC Charlotte campus – also comes with another sizable benefit – it can fit a lot of staff – a fact not lost on the firm itself.
Vanguard states its acquisition of new premises follows “a careful and strategic search in the region over a period of time.”
Yet, its big move may owe as much to opportunism as it does to strategy, says DeMaso.
Story Timeline
“The timing may simply be a result of COVID-19 being in rear-view, and an opportunity to buy at a good price. It may also just reflect the general trend toward returning to the office,” he explains.
Once the offices open, all Vanguard's Charlotte-based staff will work in the same location for the first time in the 27 years since the company first set-up in the city.
Until now, Vanguard leased five separate premises in Charlotte, although four are within the same office park.
Maximizing value
Vanguard picked up its new 91-acre campus in Charlotte's University City in early April at a bargain-basement price.
Centene Corp., a publicly traded Medicaid-managed health care company based in St. Louis, was slated to spend $1 billion on the campus.
Vanguard set to launch geek-spirited think tank in heart of Philly as its 'robo' (that really isn't) hits $47 billion of AUM
But it backed out of moving there after most of its employees shifted to remote work during the pandemic.
“Holy hell, had to look that up on a map, and it's basically in the middle of nowhere surrounded by generic office buildings and single-family housing,” wrote one commenter on a sub-Reddit string dedicated to Charlotte.
"Imagine having the money to fund a project like this, and then say, 'Meh...we decided we don't want it,'" wrote another.
The campus was empty for two years, until Vanguard stepped in to buy the Class-A property for about $167 a square foot.
Vanguard financed the acquisition with a $96.4 million self-financed loan, according to a local commercial property website, citing public records.
“[It's] a brand-new, modernized campus that maximizes the value of in-person collaboration and reinforces our commitment to Charlotte as a hub for purpose-driven talent,” says Manry.
Indeed, when Centene first announced its move to Charlotte – buying at least 210 acres for roughly $19 million – its campus was set to become its East Coast headquarters and the largest development project in city history.
Crunching the numbers
Centene likely spent somewhere in the region of $420-million to $500-million to build the offices Vanguard will shortly occupy, given the estimated $599- to $719-per-square-foot cost when building a mid-rise building in the city.
As a result, the $117 million Vanguard paid may prove to be a savvy investment.
In fact, given the average $28 per square foot cost of renting office space in Charlotte, Vanguard's new offices would cost a minimum $19.6 million a year to rent, which means the campus will effectively pay for itself in six years.
Centene was also set to receive $32 million from the city and up to $450 million in “incentives” from the state, according to multiple reports.
Charlotte City spokesman Gregg Watkins and the State of North Carolina have both yet to answer whether they offered or intend to offer similar support to Vanguard.
Vanguard has not requested such support, according to a source.
Expansion minded
Vanguard has never created a defined technology campus in the Silicon Valley style.
It first expanded out of its Malvern base in 1994, adding offices in Scottsdale, Ariz. It opened in Charlotte in 1997.
Since then, the firm has opened domestic offices in Washington, D.C. and Dallas-Forth Worth.
Vanguard also runs at least 15 overseas offices.
It will continue to lease its current Charlotte offices until it finishes retouching its new Charlotte base, according to the firm.
Vanguard currently employs roughly 20,000 staff, at least 12,000 of which still work in 31 buildings in greater Philadelphia.
In November 2022, it bought a new 300,000 square foot building occupying 25 acres in Malvern, Pa.
Rely on RIABiz? Tell Google.
Naming us a preferred source puts our reporting first in your Top Stories and AI Overviews. Takes one click, and only you see the difference.