Vanguard CEO to step down

Vanguard Group, the U.S. mutual fund manager best known for its low-cost portfolios, surprised the industry Friday with news that Chief Executive Jack Brennan will step down.

Vanguard insider William McNabb, who has run the firm’s institutional investor group for more than a decade, will become president 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 $239 billion to $1.3 trillion in his 12 years at the helm. His decision to step aside shocked industry analysts and investors because he is only 53 and says he is in good health.

“I was surprised to hear this,” Morningstar analyst Daniel Culloton said. 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 heads, followed his request. Brennan said he would 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 website.

Although his decision was unexpected, analysts said it did not signal a shift in how Vanguard was run and likely wouldn’t damp investors’ taste for portfolios like the $114-billion Vanguard 500 Index fund.

“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 hand over.