UPDATE 2-Vanguard CEO Brennan to step down within a year
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BOSTON, Feb 22 (Reuters) - Vanguard Group, a leading U.S. fund manager best known for its low-cost portfolios, surprised the industry on Friday with news that Chief Executive Officer Jack Brennan will step down.
Vanguard insider William McNabb, who has run the Institutional Investor Group for more than a decade, will become president on March 1 and succeed Brennan within a year, the privately held company said.
Brennan has long been praised as an effective CEO who helped Vanguard's assets balloon from $238.7 billion to $1.3 trillion in his 12 years at the helm.
His decision to step aside shocked industry analysts and investors, especially considering he is only 53 and says he is in good health.
"I was surprised to hear this," said Morningstar analyst Daniel Culloton. He said Brennan, who attended a conference in Florida this week, had given no hints recently that he was close to leaving.
Insiders said it was Brennan who initiated the plans to find a successor and that the board, which he chairs, followed his request. Brennan said he will remain chairman and stay active with the leadership team.
"I am a believer that change is a critical part of keeping an organization vibrant and evolving for the better. So, change at the top, if you will, is something that I believe in as well," Brennan said in an interview on the company's Web site.
While his decision was unexpected, analysts said it does not signal a shift in how Vanguard is run and likely won't dampen investors' taste for portfolios like the $114 billion Vanguard 500 Index fund.
Last year, Malvern, Pennsylvania-based Vanguard was the best-selling fund complex in America as investors put $76.2 billion into its stock, bond and exchange traded funds, according to data from Financial Research Corp.
"I would not expect massive changes," Culloton said, noting that McNabb, 50, knows the company well and will have plenty of time to work with Brennan on a smooth handover.
Brennan said of McNabb, "He is intimately familiar with, and has been actively involved in, all of our investment, business and technology efforts."
In addition to taking the post of president on March 1, McNabb will become a Vanguard director.
Brennan was handpicked for the CEO job when Vanguard founder John Bogle searched for a successor. Over the last dozen years, he pushed hard for the firm to adopt new technology and spearheaded its move into lucrative exchange traded funds. But Vanguard also maintained its reputation as a conservative investor -- a reputation that was not tarnished in the industry's recent market timing scandal.
The change in Vanguard's executive suite comes at a time when several prominent mutual fund companies have gotten new leaders. Legg Mason Inc (LM.N) named Mark Fetting to replace Raymond Mason, 71, in January. Last year, Eaton Vance Corp (EV.N) named Tom Faust to replace Jim Hawkes, and Jim Kennedy replaced George Roche at T.Rowe Price (TROW.O). Continued...
