Vanguard internal dividend up most since 1997-adviser

BOSTON (Reuters) – Vanguard Group Inc raised a profit-sharing dividend for employees by 16.5 percent for 2017, the largest increase since 1997, an investment adviser who follows the largest mutual fund company said on Friday.

Daniel Wiener, who also runs a newsletter for Vanguard investors, said via e-mail that payouts made under the Pennsylvania company’s Partnership Plan are based largely on assets under management, which have risen sharply in recent years.

Vanguard’s well-known passive funds such as its Vanguard 500 Index Fund together received $329 billion in net deposits from investors last year, according to researcher Morningstar, the most of any firm in the industry and helping drive the company’s total assets above $5 trillion.

A Vanguard spokesman, John Woerth, declined to confirm the figures obtained by Wiener. Referring to its workforce, Woerth said via e-mail that the Partnership Plan “aligns the interests of the crew with those of Vanguard’s clients.”

Woerth also declined to disclose the pay of top executives including CEO Tim Buckley, which the closely-held company does not describe in filings.

Wiener said partnership dividends account for most of top executives’ compensation and that the best way to estimate the pay of leaders like Buckley is to compare it to what the plan would have produced for past leaders for whom disclosures are available.

As an illustration, he estimated the latest dividends would have produced payouts of about $24 million and $14 million for two past Vanguard leaders, although they would no longer receive the partnership dividends.

For current executives, Wiener wrote, “It may not be hedge-fund money, but for a low-cost indexing shop it ain’t peanuts either.”

Reporting by Ross Kerber; Editing by Frances Kerry