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Michael Hiltzik: Vanguard, one of our top investment firms, shuns crypto 'like the plague.' That's good for its customers

Michael Hiltzik, Los Angeles Times on

Published in Business News

After Jan. 10, when the Securities and Exchange Commission approved the first bitcoin exchange-traded investment products, the biggest investment firms jumped into the pool with both feet, jostling one another to offer their clients, big or small, access to bitcoin funds.

All, that is, except the second-biggest private investment management fund on the planet, Vanguard Group.

The firm has made clear, most recently in a Jan. 24 message to its clients, that it has no plans to offer a bitcoin exchange-traded fund (ETF) or any other cryptocurrency-related products. Nor will it allow any such products from other firms to be offered via its brokerage arm.

Vanguard spelled out precisely why it is shunning crypto despite the "headlines and buzz" the asset class generates. Put simply, it doesn't think crypto belongs in retail investors' portfolios.

That's a smart and responsible policy that places the interests of Vanguard's clientele ahead of those of the greedy promoters and scamsters infecting the entire cryptocurrency field.

Bitcoin and other crypto investments have typically spelled financial disaster for ordinary investors. Stories of life savings lost in supposedly safe crypto investments are distressingly common.

 

Vanguard's executives know they're swimming against a tide of pro-crypto propaganda from entertainment and sports stars as well as prominent authors. That doesn't faze them.

"In Vanguard's view, crypto is more of a speculation than an investment," Janel Jackson, the firm's global head of ETF capital markets, stated in the recent message, which was headlined "No bitcoin ETFs at Vanguard? Here's why."

Contrasting crypto with traditional asset classes, she wrote: "With equities, you own a share of a company that produces goods or services, and many also pay dividends. With bonds, you get a stream of interest payments. Commodities are real assets that meet consumption needs, [and] have inflation-hedging properties.... While crypto has been classified as a commodity, it's an immature asset class that has little history, no inherent economic value, no cash flow, and can create havoc within a portfolio."

These words are significant for several reasons. One is Vanguard's size: With more than $7 trillion in assets under management as of 2023, the firm ranks as the second-largest American investment management firm, after BlackRock (more than $9 trillion). Also, more than many other such firms, Vanguard's target market is retail investors pursuing a long-term buy-and-hold strategy.

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