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* Tim Buckley, head of retail investor group, is replacement
* Sauter directs groups overseeing $1.6 trillion in assets
* Departs after 25 years at the company
By Ashley Lau and Aaron Pressman
NEW YORK, June 22 (Reuters) - Gus Sauter, the long-time chief investment officer at Vanguard Group, the largest U.S. mutual fund company, will retire at the end of the year, the company said on Friday.
Sauter, 57, will be replaced by Tim Buckley, 43, a managing director at Vanguard, based in Valley Forge, Pennsylvania. Sauter currently directs Vanguard's global investment management groups, which oversee $1.6 trillion in aggregate assets.
"Vanguard has become a much deeper organization and had grown quite a bit so I do not think his departure will represent the same kind of challenge as it would have 10 years ago," said Russel Kinnel, director of mutual fund research at Morningstar Inc.
Vanguard oversees some $2.1 trillion in total assets including 170 U.S.-based mutual funds totaling $1.8 trillion.
Sauter, who joined Vanguard in 1987, was key in helping the company build and maintain its leadership position in the mutual fund space. He spearheaded Vanguard's push into exchange-traded funds starting in 2001, a group that now ranks third-largest in the world with almost $200 billion in assets.
"They didn't just simply sit on their own line of index funds and say 'these are good enough, we are happy'," said Kinnel, referring to the company's decision to move to indices that allowed for lower turnover and lower trading costs. "They changed a lot of their indexes to find better ones out there."
Vanguard's first ETF, the Vanguard Total Stock Market ETF , began trading in 2001 and is now one of the largest with $20 billion in net assets.
Sauter, who was named chief investment officer in 2003, also led Vanguard's efforts to develop quantitative stock management strategies in the 1990s.
Buckley will assume Sauter's job from his role as managing director of Vanguard's retail investor group. Buckley has held senior roles at Vanguard since 2001, when he became chief information officer and head of Vanguard's information technology division. He joined Vanguard in 1991 as an assistant to then Chairman John Bogle.
"Our focus will continue to be on low-cost, broad based, and enduring investments, and managing Vanguard's clearly defined portfolios with our hallmark discipline and prudence," Buckley said in a statement.
The most important next step for Buckley will be to stick to the current framework executed by Sauter and not veer from the "well-defined" Vanguard franchise, said Dan Wiener, editor of a newsletter for Vanguard investors and chairman of Massachusetts-based wealth manager Adviser Investments.
"Working in this low-return environment... the best thing he can do is stay in the box," Wiener said.
In his new role, Buckley will oversee more than 300 equity, fixed income, risk management and investment strategy professionals.
Sauter had in recent years focused on integrating Vanguard's global investment management reach to aid the company's expansion in Australia, the Pacific Rim, the U.K., Canada and Europe.
"It is time to pass the baton to a new leader who can further build upon our strong investment management foundation," said Sauter, who is considering teaching among his post-retirement plans.