Vanguard's Advantage Wasn't It Mutual Structure But It's Investment Philosophy

Vanguard's unique corporate structure is not why Vanguard is different and beating people. There is plenty of money to be made in Vanguard's corporate structure. Vanguard is successful because it's investment approach/philosophy conforms to financial theory (ie. it creates broad-based asset class products) and seeks to be the lowest cost producer. I guess not having to respond to profit pressures from shareholders is valuable, but a for profit company could have adopted the same strategy and been equally successful. In fact, Dimensional is an example of that as were Wells Fargo Nikko and Barclays Index which have since been subsumed. Mutual funds are in theory structured the same way as Vanguard, but when controlled by for profit entities are obviously not interested in doing everything in the client's/shareholder's best interests.

When and How to Return Capital to Shareholders

This is a good article on what to do with a big cash hoard with Apple as the example par excellence. I am with Felix. I don’t like financial engineering. I have seen too many good companies hollowed out just to juice the stock (often with little effect) only to leave them with financial risk that comes back to bite a few years down the line (ala Private Equity). And I don’t like roll-ups. I have seen too many companies raid the cookie jar either to keep the growth for growth sake game going (at a much lower quality level), or for ego purposes or because they don’t know what else to do with the money (because they have no vision). The underlying thought or dislike is that we mouth epithets to shareholder value creation and returning capital to shareholders but the reality is that management controls the show. It is not too far from the truth that management does most things to benefit management. Being disciplined with cash is just as important for a company as it is for an individual. From an investor/shareholder perspective I am quite happy with a firm accumulating cash and maintaining a strong, clean balance sheet. If the cash stock is beyond what is reasonable (as is the case with Apple...ironically) then it can be returned in the form of a dividend (drip it out), rather than buybacks that sound good in theory but I never seem to see any real effect (other than juicing EPS for management stock options).

http://blogs.reuters.com/felix-salmon/2013/10/29/apple-should-be-like-bloomberg/