Vanguard, which has criticized Bitcoin, set to become largest shareholder in Strategy

Vanguard, which primarily manages index funds, reluctantly includes Strategy

Vanguard still does not broker Bitcoin ETF trades

The Vanguard Group, which has long dismissed Bitcoin as an 'immature asset class with no intrinsic value,' is projected to become the largest shareholder of Strategy (formerly MicroStrategy), a prominent alternative investment vehicle for Bitcoin. This result stems from the nature of Vanguard Group’s funds, which, due to their focus on ETFs and index funds, must include all stocks evenly – regardless of preference.

According to Bloomberg, which compiled data based on Vanguard Group’s regulatory filings on the 15th (local time), Vanguard holds 20 million shares, accounting for 8% of all Class A common shares issued by Strategy. In terms of asset value, this is approximately $9.26 billion (about ₩12.77 trillion).

As a result, Vanguard is likely to overtake the current top shareholder, Capital Group, and emerge as the largest shareholder in the fourth quarter. This is the sum of Strategy shares included across Vanguard’s dozens of mutual funds and ETFs.

Vanguard’s funds cover not just large caps but also a wide range of index funds— mid-cap, small-cap, benchmarks, momentum, value investing, growth indicators— with a total AUM of $10 trillion (about ₩13,800 trillion).

Vanguard has not made any special investment in Strategy. Recently, steady inflows into the U.S. stock market have boosted Vanguard's index fund assets to $10 trillion. According to Bloomberg, Vanguard is now the largest shareholder of about 400 S&P 500 companies.

As a pioneer in index funds, Vanguard Group has long maintained a critical view on cryptocurrencies, asserting they are unsuitable for long-term investors, form an immature asset class with no inherent economic value, and could undermine portfolios.

When Bitcoin ETFs were launched in the U.S. last year, Vanguard publicly stated it would not allow Bitcoin ETF trading on its brokerage platform. It further announced it had no plans to launch its own crypto-focused products, given the 'speculative' nature of cryptocurrencies. At that time, then-CEO Tim Buckley said, "It's really hard to see how one could fit it into a long-term portfolio."

Eric Balchunas, Senior ETF Analyst at Bloomberg Intelligence, remarked, "God has a sense of humor," adding, "Vanguard, mainly running index funds, must include all stocks—good or bad, wanted or unwanted—in their holdings, even those they dislike or oppose."

Strategy has built a reputation through its large-scale investments in Bitcoin. Led by Chairman Michael Saylor, a noted crypto expert, the company raises funds to purchase Bitcoin by issuing bonds and stocks. Since starting this business in 2020, Strategy’s share price has surged about 3,400% due to its Bitcoin investments, and companies worldwide have followed its approach.

With Bitcoin’s recent rise, Strategy, which holds more than $70 billion in cash, now owns over 600,000 bitcoins—the largest corporate holding globally. Saylor himself owns about 20 million shares of Strategy.

Saylor argued, "The fact that Vanguard owns so much of Strategy stock is a powerful indication of growing institutional support for Bitcoin." He added, "This shows that the established financial sector increasingly recognizes Bitcoin as a legitimate reserve asset."

Vanguard clarified that its funds’ holdings of Strategy shares do not necessarily reflect a conviction. The firm's actively managed Momentum Factor ETF (VFMO) uses a quant model to select stocks, benchmarking mid-cap and small-cap indices.

Strategy was recently included in the increasingly popular Nasdaq 100 Index.

The unintended stock price surge of Strategy, acquired incidentally by Vanguard, has also yielded substantial profits for Vanguard. While Bitcoin rose 300% over the past two years, Strategy’s share price soared by more than 850%.

Roxana Islam, head of sector and industry research at ETF specialist manager TMX BetaFi, noted, "Even if Vanguard isn't directly investing in crypto, its clients are making indirect investments through Vanguard's passive index funds." She added that, even if clients are unaware, "crypto assets are already deeply embedded in existing indices and client portfolios."

The previous day, Bitcoin surpassed $123,000, lifting Strategy’s share price by 3.7%, but as Bitcoin fell over 3% on the 15th, Strategy traded at $441, down 2.1% in New York pre-market trading.

Contributing reporter Jung-A Kim kja@hankyung.com