VictorReklaitis

Bloomberg News A Vanguard Group employee works at a call center at the companys headquarters.

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MALVERN, PA. (MarketWatch)—Vanguard isn’t Apple or Coca-Cola, but with its huge retirement-accounts business and its $3 trillion overall in assets under management, it’s a familiar name for many Americans.

Shutterstock.com Getting active? Vanguard, though best known for passive investing, doesn’t say no.

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1. The index-funds pioneer has a lot of active funds

Vanguard launched the first index mutual fund back in the 1970s. But the company got its start with traditional, actively managed funds run by stock pickers. It still offers active funds that have beat the market over long periods. (Don’t tell the passive-investing purists, but roughly half of Vanguard’s assets under management are in actively managed funds.)

“Quietly, Vanguard’s actively run funds have outperformed their more-famous index siblings,” said Morningstar researcher John Rekenthaler in a recent column. pointing to returns over the past 15 years. That’s a particularly striking result, since in general, most active funds aren’t able to beat their benchmarks consistently .

What’s Vanguard’s secret to success? It includes making sure its active funds are low-cost, as well as outsourcing the stock-picking to fund managers who go through an extensive screening process.

“We think we have a very good process for selecting managers,” Vanguard CEO Bill McNabb told MarketWatch. He also said: “If you’re going to take active risk, your best chance of preserving any outperformance is to have a low-cost portfolio.”

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2. Ahoy there! Vanguard’s crew has a thing for nautical themes

A visitor to Vanguard’s campus outside Philadelphia might be surprised to encounter quite a bit of high-seas vocabulary. Employees are called crew members, the cafeteria is the galley, the gym is named ShipShape and the company store is the chandlery.

It turns out the nautical theme goes far deeper than that. The company itself is named after HMS Vanguard. the British admiral Horatio Nelson’s flagship in the Battle of the Nile in 1798, and buildings on the corporate campus are named after Nelson’s other ships, such as Victory. Zealous and Goliath. There’s also a ship incorporated in the company’s logo

Jack Bogle, Vanguard’s founder, has said that a dealer in antique prints visited him in 1974 and left him a book about Great Britain’s naval achievements. One part of the book talked about Nelson’s flagship, leading Bogle to think, with regard to Vanguard, “What a great name.”

To some eyes, including those of some Vanguard crew members, the layout of the core campus even resembles a ship, as shown in the adjacent aerial view. A company spokesman said there is a resemblance but that it’s just a coincidence, noting that a recent addition to the campus—a few buildings that are being called “Malvern West”—takes away from the resemblance.

What do crew members have to say about the nautical theme? “I like it, and I think it baffles people who are from outside Vanguard, which maybe even makes it better,” said Martha King, managing director for Vanguard’s financial adviser services division. Chris Philips, a senior analyst in Vanguard’s investment strategy group, said the nautical terms resonate. “The crew of a ship has to work in tandem, in union, otherwise you’re going to go nowhere,” Philips said.

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3. Critics say ‘slow’; the company says ‘careful’

Yes, Vanguard was first with index mutual funds. But the company took a few years to get into the game with exchange-traded funds, those increasingly popular investing vehicles that mostly track indexes. The company launched its first exchange-traded fund in 2001—eight years after the first ETF started trading.

“We didn’t see the application of ETFs to long-term investing,” Vanguard’s McNabb told MarketWatch, adding that the early ETFs were seen as short-term trading vehicles.

Vanguard also isn’t moving quickly to launch ETFs in a hot niche known as smart beta. an area of index investing that seeks to enhance returns or minimize risk relative to conventional market cap-weighted benchmarks. These ETFs, which Morningstar prefers to call “strategic beta” funds, have been around since at least 2005. Some existing Vanguard ETFs deserve the strategic beta label, according to Morningstar, but Vanguard has criticized this area and hasn’t joined rivals in offering more ETFs in this trendy space.

“What we’re looking for are long-term, enduring ideas that are going to help somebody create wealth,” McNabb said. “The idea of back testing a bunch of factors—which is all smart beta is—throwing them up and saying, ‘Well, in the back test they worked really well. We’ll see what happens when they get real money.’…We’re just not going to do that.”

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4. It’s the house that Bogle built, but Jack’s moved out

Vanguard’s best-known figure is arguably still Jack Bogle, the company’s founder and its first CEO—who has been called “Saint Jack” by some appreciative mom-and-pop investors. His link to the company is now rather limited, though, even as the outspoken octogenarian continues to talk and write about investing.

It’s interesting that current CEO McNabb, when asked about Bogle, said he will “see Jack periodically in the halls.” McNabb said Bogle deserves credit for his vision, passion and Vanguard’s solid foundation, while Jack Brennan, Vanguard’s second CEO, gets credit for the company’s broader reach and scope.