What is the secret of Vanguard Group’s success?

According to the Wall Street Journal, the Malvern-based mutual fund manager is coming off a great market run:

For the 12 months ending June 30, 2014, Vanguard had net cash inflows of more than $92 billion. And this is over a period in which the 10 largest fund families had a total net inflow of roughly $88 billion. In other words, over this period, Vanguard had cash inflows of $92 billion while the other nine companies had a combined net outflow of $4 billion!

So when the Wall Street Journal asked five mutual fund observers which financial services marketing campaigns were having the largest impact, two analyst, Mike Piper, author of the obliviousinvestor blog and Matt Hougan, President of ETF.com, pointed immediately to Vanguard Group’s campaigns.

“Pure genius,” says Hougan. “Most effective,” concurs Piper.

Together the two market watchers summarize Vanguard’s success stems from three factors:

Low costs – “The company is (indirectly) owned by the investors in the funds,” states Piper. “As a result there is no need for an extra layer of costs simply to provide profits to third-party shareholders.”

Advertising emphasizing Solidarity – “Vanguard’s advertising campaign never mentions price,” says Hougan. “Instead,” Hougan continues, “[Vanguard’s advertising] emphasizes solidity. There are pictures of boats. There is very solid, simple typography and design. The ads nearly ooze mahogany and polished brass. They say, “Trust us, we’re serious.””

Superior Performance – According to Hougan, “Vanguard is one of the best index fund managers in the world, operating at truly world-class standards.” Piper agrees saying Vangaurd’s funds are “so good that people recommend it to their friends, colleagues, and clients without being paid to do so.”

Read Piper’s review here, Hougan’s evaluation here both in the Wall Street Journal.