WITH VANGUARD LIKE A BARNACLE: WIENER THE SNITCHER KEEPS EYES ON NO. 2 AND GOES ALONG FOR RIDE

Vanguard Group is coming off the most robust year in its history, but it’s not the only one benefiting from its meteoric rise.

Daniel P. Wiener, a newsletter editor and money manager, has been riding the No. 2 fund group’s wave of success since 1991, when he began publishing what is now called the Independent Adviser for Vanguard Investors.

As the Malvern, Pa., indexer’s assets under management have ballooned — up 471% to $440 billion since 1991 — so, too, has the circulation of his newsletter. Today, he boasts 43,000 readers — more than double the total of three years ago — and a thriving money management business.

But Mr. Wiener hasn’t exactly gone along for the Vanguard ride quietly.

As mutual fund returns have become more readily available to investors, he has set himself apart from other newsletter editors by appointing himself a Vanguard watchdog — one with a rather loud bark. As a former business journalist, he knows exactly the type of information that can set a media wolf pack howling.

Mr. Wiener has bugged Vanguard on more than one occasion by scouring public filings for the pay of chairman and chief executive John Brennan and senior chairman John C. Bogle and publishing the figures. Mr. Wiener says Mr. Bogle once called him “a gnat.”

Mr. Wiener frequently mouths off to reporters about Vanguard’s reluctance to disclose the compensation of its two top executives. He also calls attention to whether the company’s directors “eat their own cooking,” by publishing their fund holdings whenever Vanguard issues proxy statements.

Last year, for example, he chided Mr. Bogle for not putting his “money where his mouth is” on indexing, reporting that less than one third of his investments were in index funds at the end of March 1998.

“It’s my intent to be as much of a watchdog and truth seeker as possible,” says the scrappy 42-year-old, who works out of his Brooklyn brownstone.

Mr. Wiener was mutual fund editor at U.S. News & World Report when he left to go into the newsletter business full-time. He sold his venture to Phillips Publishing Inc. in 1995, and continues to edit it under a contract with the Potomac, Md., company.

In 1994, he began managing money (about $172,000) for individuals too pressed for time to follow his newsletter recommendations. Today, his Watertown, Mass., Adviser Investment Management Inc., which he runs with several partners, has $120 million, all invested in Vanguard funds.

EXASPERATION, PERHAPS?

He may be a substantial Vanguard customer, but, says a company spokesman, “We don’t have any desire to comment about Dan Wiener.”

The frosty relationship has somewhat limited his access to portfolio managers, but it was Vanguard that inadvertently helped him get some of his first media exposure in 1993, by suing him in federal court over use of its name in his newsletter.

Mr. Wiener contends the suit was motivated by his calculation of Mr. Bogle’s 1992 pay (an estimated $2.6 million), which was cited in a Forbes magazine article.

A company spokesman says the newsletter, then called Vanguard Adviser, “caused confusion among our shareholders that (it) was connected with the Vanguard Group.”

In the end, the suit was withdrawn and Mr. Wiener agreed to change the name of the newsletter.

“It’s a testy relationship (with the company) because Jack Bogle and John Brennan are joined at the hip and they don’t like to lose,” says Mr. Wiener. “In this case, they lost because I’m still here.”

Meanwhile, last year Vanguard omitted the compensation of Mr. Bogle and Mr. Brennan from its proxies.

A spokesman says there is no disclosure requirement because the executives are not paid directly by the funds but rather by Vanguard Group, which is owned by the funds, and their pay “is not a material thing that helps investors make better investment decisions.”

“On the one hand, they are very interested in disclosure that gives them an advantage,” says Mr. Wiener, referring to Mr. Bogle’s frequent calls for more disclosure of mutual fund industry costs, “but they are very anti-disclosure when they feel it is something they don’t want to give away.”

NOT ALWAYS ST. DANIEL

Still, Mr. Wiener’s coverage hasn’t been entirely high-minded, according to an industry observer.

“There has been an aspect of his coverage that has always disappointed me,” says Don Phillips, president of Chicago-based fund tracker Morningstar Inc.

Mr. Phillips calls some tips gimmicky, such as how to get around minimum investment requirements. Those minimums, Mr. Phillips says, help Vanguard hold down costs.

“The stories that have gotten more notoriety are the nit-picky ones finding fault with small procedural aspects” of the way Vanguard does business, he says. “That said, Vanguard shouldn’t be given a free pass. In that sense, it’s hard to say that Dan’s very close critique of the firm is unwarranted.”

“My job,” argues Mr. Wiener, “is to give people every opportunity and every angle they can use to their advantage. Not everyone is like Don Phillips and has $100,000 to invest.”

Actually, Mr. Wiener says he has “seven figures” invested in about 35 Vanguard funds for himself and his family, including Health Care, Primecap, U.S. Growth and Windsor II.

And he has fared better than most newsletter editors in investment performance, ranking third among 104 newsletters tracked on a five-year risk-adjusted basis through Nov. 30, according to Hulbert Financial Digest in Annandale, Va.

Mr. Wiener’s newsletter offers four model portfolios (growth, conservative growth, income and growth index), each investing entirely in Vanguard funds.

The most aggressive, the stock fund-heavy growth portfolio, gained 23.5% last year, according to the newsletter — not all that far behind the 26.67% return of the Standard & Poor’s 500 index. His model portfolios had composite returns of 19.5% and 23.6%, respectively, in 1996 and 1997, vs. 21.2% and 31.3% for the Wilshire 5000 index, reports Hulbert.

To be sure, Mr. Wiener’s fortunes are tied to Vanguard’s in more ways than one, although it doesn’t appear that the company’s rocket ride will stall anytime soon.

“It’s hard to write a newsletter on a single family,” says Sheldon Jacobs, editor of No-Load Fund Investor, an Irvington, N.Y.-based newsletter. “You are in bed with them whether you like them or not.”