Hello, YieldAlley readers! In this issue:

☢️ Is there any such thing as a safe investment? (Fast Company)

🏎️ Apple scores big victory with ‘F1,’ but AI is still a major problem in Cupertino (CNBC)

👨‍🏫 Lessons on Money & Life I Learned From Warren Buffett (VettaFi)

🫒 Greece’s Olive Oil Crisis Is Bad Enough to Tempt Thieves (Bloomberg)

🏖️ The 'First Year of Retirement' Rule (Kiplinger)

Vanguard Group, the $10 trillion asset management giant that built its reputation on ultralow-cost investing, is making its most significant strategic pivot in decades as it ventures into private markets and expands beyond its traditional index fund offerings, while continuing to cut fees on the products that made it famous.

The moves represent a fundamental shift for the company that pioneered passive investing and has spent nearly 50 years driving down investment costs across the industry. Under new CEO Salim Ramji, who joined from BlackRock in 2024, Vanguard is pursuing growth in areas that require higher fees and more complex investment strategies, even as it delivers additional savings to its devoted "Boglehead" fanbase.

In April, Vanguard announced a partnership with private equity giant Blackstone and Wellington Management to create an "all-markets fund" that will blend public stocks and bonds with private investments. The fund is Vanguard's first major foray into private markets, where fees typically run significantly higher than the company's signature low-cost index funds.

The initiative follows similar moves by competitors. State Street partnered with Apollo Global Management to create target-date funds with approximately 10% private market exposure, while BlackRock plans to launch similar products next year. Capital Group's recent fund with KKR charges gross fees around 1.57%, compared to 0.62% for its largest bond fund.

For Vanguard investors, this shift means access to asset classes previously available only to institutional investors like pension funds and endowments. However, it also means higher fees and less liquidity. Investors may not be able to withdraw money as easily as they can from traditional mutual funds or ETFs.

But even as it explores higher-fee products, Vanguard continues its trademark fee cutting for existing customers. In February, the company reduced its average expense ratio from 0.07% to 0.06%. This caused BlackRock's stock to fall 5% on the announcement day. The move demonstrates what analysts call the “Vanguard effect”, the company’s ability to force industrywide fee reductions.

This dual strategy protects Vanguard's core constituency while opening new revenue streams. Traditional Bogleheads, the devoted followers of founder Jack Bogle's low-cost philosophy, can continue accessing their preferred simple, ultra-cheap index funds while the company pursues growth elsewhere.

"We are very, very, very conscious that fees matter," Ramji said, emphasizing that even Vanguard's private market ventures will maintain cost discipline relative to competitors.

Under Ramji's leadership, Vanguard has launched six new ETFs this year, all focused on bonds and maintaining the company's low-cost approach. The strategy targets what Ramji calls inefficiencies in fixed-income markets, which are "twice the size of the equity market" but "far less understood" than stock markets.

The bond market focus aligns with Vanguard's aging customer base, many of whom are approaching or entering retirement and seeking income-generating investments with lower volatility than stocks.

Vanguard faces increasing political scrutiny alongside other large asset managers. The company is defending against a Texas lawsuit, supported by a dozen other states, that accuses it of colluding with BlackRock and State Street to reduce coal production. Republican lawmakers have criticized large asset managers for allegedly pushing environmental policies through their shareholder voting.

Vanguard preemptively left the Net Zero Asset Managers initiative in 2022, more than two years before BlackRock and other competitors, but continues to face political pressure that could affect its operations.

Meanwhile, the Trump administration is reportedly drafting an executive order to ease inclusion of private investments in 401(k) plans, potentially opening a massive market for Vanguard's new private market offerings.

Traditional Vanguard Customers: The core low-cost index funds that built Vanguard's reputation continue to see fee reductions and remain unchanged. Bogleheads can stick with their preferred simple, transparent investments without being affected by the company's expansion.

Retail Investors Seeking Diversification: Will gain access to previously restricted private markets but face higher fees and reduced liquidity. The new products may be most suitable for long-term investors who don't need immediate access to their money.

401(k) Participants: May see private market options added to their workplace retirement plans, typically through target-date funds. However, most large employers remain hesitant to adopt higher-fee products due to potential litigation from plan participants.

Despite concerns about straying from its core mission, Vanguard continues to dominate fund flows. The company has captured 29% of American ETF inflows and 41% of stock fund inflows this year. Its market share of U.S. mutual fund and ETF assets has grown to 28%, up seven percentage points over the past decade.

The growth trajectory suggests investors remain attracted to Vanguard's core value proposition, even as the company expands into new areas. The continued fee cuts on traditional products help ensure that existing customers benefit from the company's scale while new products target different investment needs.

Investors should monitor several key developments:

The changes at Vanguard reflect broader industry trends as asset managers seek growth in an increasingly competitive landscape. For traditional Vanguard investors, the developments offer reassurance that their preferred low-cost approach remains a priority, which we at YieldAlley were pleased to see. The new products provide options for those seeking broader diversification, even if it comes at a higher cost.

Government Money Market Funds (7-Day Yields)

Brokered CD Rates (6-Month Rate)

ETFs (30-Day Yields)

US Bank has relaunched a substantial business checking promotion offering bonuses up to $1,000 for new business account holders, representing one of the more competitive business banking incentives currently available. The tiered structure provides options for different business sizes and deposit capabilities.

This promotion offers exceptional value for businesses with available capital, providing returns of 8% on the Silver tier and 4% on the Platinum tier for relatively short commitment periods. The straightforward qualification requirements - maintaining balances and completing basic transactions - make this accessible for most business operations. However, the geographic limitations restrict availability, and the substantial deposit requirements may challenge smaller businesses. The 60-day balance maintenance period is reasonable compared to many competitors, though businesses should factor in opportunity costs of tying up capital. The lower bonus structure allows flexibility in choosing the appropriate commitment levels based on your cash flow needs.