In His Own Words: How Gerry O’Reilly Managed the World’s Largest Mutual Fund

I asked O'Reilly why it is so challenging.

I think people think that, hey, it's passive, there's not a whole lot to be done, but it turns out that there is quite a lot to be done.

So if you think about the total stock market portfolio that I manage, it's 4,000 securities.

So on any given day, you've got so many moving parts.

We could have syndicate offerings we could have uh you know you've got cash flows coming out of the fund you've got elections that need to be made if stocks need to be tendered and all of that and you're also looking at cash flows that are coming into the fund and we accept cash flows all the way up until four o'clock so you know you need to factor all of that into running your trade list at the end of the day and making sure that at the end of the day that your fund is exactly tracking the benchmark so there's lots of moving parts and then There's the trading aspect of it, which is even when you've generated the trade list, what's the best way to trade this list so that you have tight tracking without having too much impact on some of the names that might be more liquid in your basket? So there's lots of moving parts Consuelo going on.

And our job is basically to deliver the return of the benchmark to our shareholders every day.

You were quoted as you have to deliver perfection every day, and sometimes you have to deliver perfection plus.

So it's a daunting task that you started out at Vanguard as a trader, and then you joined the Total Start Market Fund in 1994, two years later.

So you've been there kind of from the get-go when it's expanded to where it's the world's largest mutual fund at this point.

I mean, how key is being on your feet at the trading desk every day? I mean, is that basically where all the action happens?

it is i mean it you know i would say it's first of all it is not a one-man operation i have incredibly talented team around me um both other traders uh who back me up and also you know peer groups for example you know we have a team that comes in consuela first thing in the morning they're in it before seven o'clock and making sure that all the benchmarks that we track that they are perfectly where they need to be, that all the corporate actions have been adjusted, all the splits are done, so that when I come in and I start looking at my portfolio, I know I'm comparing it to the gold standard benchmark.

And that's a lot of work.

You have some of these benchmarks that have 2,000, 3,000, 4,000 different names.

So those are the people that kind of set it up for me when I come in in the morning.

And then I have middle office folks, I've got data folks, I've got a whole bunch of people that are helping me do my job.

But I would say, The camaraderie and the interaction that we have on the desk is really kind of where the rubber hits the road.

That's where you get access to great information, reaching out to brokers about potential changes that are coming, corporate actions that might be coming along.

And so we have this really fantastic kind of camaraderie on the desk where we have probably average tenure is probably close to 12 or 13 years.

And everyone is passionate about what they do.

Indexing is part of our DNA.

Indexing is not something that we just started to do in the last few years.

No, right.

It's been at our core since the very beginning.

And fractions of a basis point is a huge deal to us.

So when you talk about perfection, we'll get reports every morning around 10 a.m. showing us how our fund did versus the benchmark on the previous day.