In a massive overhaul, Vanguard will split its $10.4 trillion in funds between two 'distinct' management teams with separate trading desks potentially trading against each other, analyst says

Vanguard Group plans to “establish two wholly-owned U.S. investment advisors” to oversee its massive $10.4 trillion fund portfolio in a dramatic shift from its monolithic, 50-year-old corporate structure. 

The leading index-fund manager made the announcement in a little-noticed “corporate statement” on its website without following up with a press release or a Securities and Exchange Commission (SEC) filing, perhaps because the changes aren't due until sometime in 2026.  

“Separate investment management teams will create a number of benefits ... deeper focus, investment teams with greater flexibility, and ... more opportunities for growth,” the company explains in the statement.

The company may also have a keen eye on seeding a new generation of hot-shot managers.

Jeff DeMaso, editor and publisher of the Independent Vanguard Adviser, adds, in an email exchange, that “the real challenge [is] can Vanguard maintain two world-class indexing teams while keeping costs low." 

Yet any trade-off could be worth it, if the move injects dynamism into a company long content to focus on commodity-like index funds.

"They'll be competing with each other … two separate trading desks will be at work – potentially trading against each other. … Splitting the teams creates more leadership opportunities and room for career growth," DeMaso continues.

RIA issues?

Pressed whether RIAs were likely to need to repaper any of their assets, to create separate accounts to own funds from each unit, or if they, or their clients, were likely to receive two statements instead of one, Vanguard insisted they would not.

Indeed, investors have nothing to worry about, the company confirmed, in correspondence with DeMaso.

“There will be no impact on statements, and no impact on the ability to hold or trade funds within a single brokerage account. The transition will be completely seamless from that perspective,” a spokesperson explained.

In its corporate statement, the company said it sees “no expected impact on expense ratios or investment performance.”

Separate but equal

The plans to form Vanguard Portfolio Management (VPM) and Vanguard Capital Management (VCM) come to light as new CEO Salim Ramji completes his first year and tackles critical challenges.  

Not least, is how to bring modern human capital strategies to a 50-year-old company laden with tenured legacy staff who leave little room for the next generation to advance.

It has to compensate them with status, as well as pay. 

The restructuring gives Vanguard room to do just that, freeing up more positions higher-up in the food-chain, according to Cecile Munoz, CEO of U.S. Executive Search & Consulting in Los Angeles, Calif.

It "allows for their culture of exceptional talent retention, and cures the paradox of equally creating growth for the next generation," Munoz says, in an email exchange.

“The evolution of Vanguard from a monolithic structure to one which addresses various growth issues; structure, risk management and human capital is absolutely right,” she adds.

"It will ensure Vanguard’s continued dominance in the market.”

Dual pathways

“Many [managers] are senior ... they’ve spent their whole life at the [fund management] desk, and Vanguard wants that to remain an attractive proposition … Having two firms with assets split between them creates more opportunity,” adds a source familiar with the reorganization.

The way splitting creates more positions is by creating more co-manager roles. 

Under the current system, one legacy manager's name might be on ten or more funds. By splitting the company, it might free up five co-manager roles – giving a junior portfolio manager – or hotshot recruit – a much improved status and sense of a future, the source explains. 

It makes managers into bigger fish in smaller ponds, according to Greg O'Gara, strategic advisor for wealth management at Datos Insights, in an email.

"It essentially creates management laboratories across divisions,” O'Gara explains.

“Top performers in each division become candidates for firm-wide leadership, creating dual pathways to larger executive roles while maintaining a diversity of experience,” he says.

“Each division operates with a different competitive focus … The structure creates new possibilities through dual career tracks, independent measurement systems, and specialized recognition … streamlin[ing] career advancement,” he adds.

Split duties

The two new units will occupy separate buildings in Vanguard's sprawling Malvern campus, and the firm intends to firewall off each, preventing them from coordinating portfolio management or trading on behalf of their respective funds, according to a source who claimed knowledge of the details.

VPM funds will include all active stock funds, including quantitative equity, ‘specialized’ index-tracking funds focused on style or dividends, for instance, and dividend funds, and third-party multi-asset active funds, according to a Morningstar report.

VCM funds will include all bond funds, Vanguard’s diversified active equity funds, its bread-and-butter index funds, and its passive retirement funds, including TDFs, the Morningstar report confirms.

Still, VPM and VCM will share a cafeteria along with hundreds of staff from other nearby buildings.

Each unit will have a separate shareholder proxy voting team, too, setting up the possibility Vanguard funds could vote against each other. Such a move could reduce suspicion over how Vanguard wields its vast proxy-voting power. See: 

Regulatory headroom

Vanguard, BlackRock, and State Street have also been sued by Texas and 10 other states for allegedly operating as a “syndicate” to use their massive proxy influence to steer global events.See: Suddenly Vanguard, BlackRock, State Street not only have the assets but the power of ESG mandates, which make them a growing threat to shareholder democracy, critics say

The three firms have lambasted the claims as "far-fetched" and a “conspiracy.” See: BlackRock, State Street and Vanguard 'smell blood'.

Vanguard is among the managers that have moved to “return” proxy-votes to their investors through technology-based programs – a process Vanguard recently stepped up by adding four of its largest funds to its 2023-launched "investor choice" program.

Now, by deliberately splitting its “stewardship” or proxy voting unit across its fund businesses, Vanguard may hope to further signal it has no interests in company policy beyond its funds' interests, and that its unit votes may even cancel each other out.

Static leadership

But the current fund management reporting model will remain in place, meaning each fund division will continue to report directly to Vanguard president and chief investment officer, Greg Davis, according to the firm.

Indeed, Vanguard is, so far, refusing to appoint a single leader of its two new subsidiaries. 

“There won't be a single leader,” says a source.

In fact, Vanguard says the reorganization was actually born of committee.

“Salim Ramji is supportive of the initiative, but these types of projects don’t really have a single leader at Vanguard," says a company spokesperson, via email. 

"Senior leadership oversees projects like these through a committee structure rather than … a single individual,” the person adds.

Yet if Vanguard backtracks and chooses to name a leader, the candidates are clear. VPM will likely come under the leadership of John Ameriks, head of Vanguard’s quantitative equity group; and VCM’s leadership will be a choice between global head of fixed-income Sara Devereux and global head of equity Rodney Comegys.

Vanguard declined to answer whether restructuring will lead to a hiring increase of managers.

Management reshuffle 

Immediately prior to the company reorganization, Vanguard also rejiggered the management of specific funds. It removed 59 named manager roles from 54 of its 441 funds worth $4.76 trillion, completing a two-step process it began in February when it added 81 new managers.

"The portfolio manager rotations announced yesterday follow the additions ... in February 2025 ... who were added ... as a reflection of the capabilities they have developed and demonstrated throughout their careers," says a company spokesman.

It also made index equity portfolio manager, Jena Stenger, and portfolio manager, Chris Nieves “named”  fund managers for the first time, adding 22 named manager positions in total.

Vanguard did not lay off any of the managers removed from “named” roles, but managers have now largely been moved to work on one of the firm's soon-to-be-two units, a source explains.

The manager reshuffle was also part of a strategy to reduce the number of equity funds overseen by a single “named’” manager, with Joshua Barrickman – a named manager on most Vanguard bond funds – a notable exception.

"Vanguard is preparing for a changing of the guard by training the next generation … and ensuring redundancy on its funds," says DeMaso.

* Vanguard, like BlackRock and other giant fund managers, at times holds a larger than 10% stake in protected domestic utilities, including energy and banking companies, but its ability to do so relies on regulators giving them permission to exceed regulatory limits – permission regulators can withdraw.