The first day of the annual Morningstar Investment Conference in Chicago this week showcased executives from two of the largest asset managers in the nation, providing insights into where the firms see opportunities for growing their business.
The day opened with comments from Rick Rieder, managing director, CIO of Global Fixed Income, BlackRock, who sketched out the firm’s convictions on the macroeconomy. Rieder conveyed his belief that, long term, robotics and AI would bring about revolutionary changes. In the near term, he predicted the U.S. would land at effective tariff rates at around 15%, which would lead to a burst of short-term inflation that would then level off, in part after the Fed undertakes a series of rate cuts later this year and next year.
He also predicted that the U.S. economy, because of its heavy reliance on services rather than manufacturing, would prove resilient to tariff effects and continue to post nominal growth.
“You don’t have to take a lot of credit risk,” Rieder said. “You can be in fixed income at the front end of the curve and throw out a 6% return. It’s a golden age not because you can make a lot of money based on interest rates, but because you can compound income above the rate of inflation. You don’t have to go down into emerging markets. You can go down the middle and get a lot of yield.”
Later in the day, Vanguard CEO Salin Ramji discussed how the firm, famous for its low fees on investment products—what Morningstar has dubbed the “Vanguard effect”—is looking to provide similar value to investors on savings accounts and financial advice.
“People today get less than 0.5% from banks on savings,” Ramji said. “We are paying 3.65%. Before someone becomes an investor, they start as a saver, and we want to offer a fair deal on that.”
On advice, Vanguard charges 15 basis points for digital advice and 30 basis points for advice with a person.
“There are fewer advisors out there while there’s a greater need for advice,” he said. “Barring a better solution, advice will become the preserve of the wealthy. We want to be able to provide advice to everyday investors.”
He pointed to the fact that the average Vanguard investor invests $200,000, but the median was $60,000—those who are traditionally not served by financial advisors.
“When you think about the ‘Vanguard effect,’ part of what we have been doing is to lower fees and part of it is to introduce more price competition in the industry, which lowers fees for all investors,” he said. “We are proud of both of those things and want to apply that to different vehicles.”
Ramji also provided an update on the firm’s partnership with Blackstone and Wellington Management Co. to launch a fund that will invest in public equities, bonds and private markets.
“We’re in early days, but we’re motivated because we think that private markets done well for the right clients at the right price can be additive to portfolios,” he said. “But we are also patient and understand that these things take time. We are learning, experimenting and partnering to see how to do it the right way to serve clients well.”
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