Vanguard Funds And Private Prison Investments: What's The Link?

The Vanguard Group is one of the largest institutional investment groups in the world, controlling over $5 trillion in investments. In 2019, Vanguard and BlackRock were identified as the biggest investors in private prisons, with both companies holding stocks in CoreCivic and GEO, two of the biggest private prison operators in the US. Vanguard has stated that prison stocks make up a very modest portion of its portfolios, and that it would be impractical to eliminate all controversial stocks from funds. However, according to Prison Free Funds, as of 31 August 2024, Vanguard's Total Stock Market Index Fund is invested in private prison operators, with $103.76 million or less than 0.01% of its assets allocated to the sector. Additionally, Vanguard's 500 Index Fund has been flagged for having higher-risk investments in private prison operators, making up between 1% and 2% of its portfolio.

Vanguard's $1.4 billion investment in private prisons

The Vanguard Group, one of the largest and most respected institutional investment groups, currently invests around $1.4 billion in private prisons and bail bond companies. Vanguard's "Vanguard Real Estate Index Fund" is advertised as a real estate investment, but The Geo Group and CoreCivic, which together control 75% of the private prison industry, are considered real estate companies. Vanguard also invests in insurance companies like Assurant and Fairfax Financial Holdings, which underwrite bail bonds and profit when more people are arrested and out on bail.

Private prison companies and bail bond companies profit when more people are incarcerated or in the criminal court system. These corporations stand to make more money when more people are sentenced to prison, so they work hard to influence policy and push for harsher sentencing laws. A report from the Justice Policy Institute details how prison corporations use lobbyists, campaign contributions, and relationships with policymakers to further their own political agenda. For example, CoreCivic, the largest private prison company in the US, has spent $17.4 million on lobbying expenditures in the last 10 years and $1.9 million on political contributions between 2003 and 2012. In 2013, CoreCivic and another major prison company, the GEO Group, funded lobbying efforts to stop immigration reform, blocking the path to legal status for over 11 million undocumented people in order to keep undocumented immigrants flowing into their facilities.

Prisoners in private prisons serve 4% to 7% longer than inmates serving similar sentences in public prisons, partly because inmates in private prisons are 15% more likely to get an infraction. People of color are disproportionately affected by for-profit prison’s modern slavery model of forcing prisoners to work for less than the company would pay staff. If the prisoners don't like it, they can receive solitary confinement and lose visitation privileges.

Vanguard has stated that prison stocks make up a "very modest" portion of the company's portfolios and that it would be impractical to eliminate all controversial stocks from funds. However, as the largest and most respected institutional investment group, Vanguard can lead the way in taking the profit out of for-profit prisons. By moving their money out of funds that include CoreCivic and Geo Group, consumers can tell Vanguard and other providers that these funds don’t work for their customers.

Vanguard's Real Estate Index Fund

The Vanguard Group is one of the largest and most respected companies for mutual funds and index funds, controlling over $5 trillion in investments. One of the areas Vanguard invests in is real estate, with its "Vanguard Real Estate Index Fund". However, it has come to light that The Geo Group and CoreCivic, which together control 75% of the private prison industry, are considered real estate companies.

Vanguard has been identified as one of the biggest investors in private prisons, alongside BlackRock. Vanguard has stated that prison stocks make up a "very modest" portion of the company's portfolios, and that it would be impractical to eliminate all controversial stocks from funds.

According to a petition calling for Vanguard to stop investing in mass incarceration, the company currently invests around $1.4 billion into private prisons and bail bond companies. The petition also highlights that people of colour are disproportionately affected by for-profit prisons, which employ a modern slavery model of forcing prisoners to work for less than the company would pay staff.

Vanguard's "Vanguard Real Estate Index Fund" is one of many Vanguard funds that have been identified as investing in private prisons and bail companies, including the Vanguard Balanced Index Fund, Vanguard Developed Markets Index Fund, and Vanguard Dividend Appreciation Fund, among others.

Vanguard's investments in bail bond companies

Vanguard is one of the biggest investors in private prisons, along with BlackRock. According to a 2019 CNN Business article, Vanguard and BlackRock are the two largest holders of CoreCivic and GEO, two of the biggest private prison companies in the US.

Vanguard's investments in the prison industry have been flagged by Prison Free Funds, which has given the Vanguard Total Stock Market Index Fund an F-grade due to its holdings in private prison operators.

Vanguard has also been criticised for investing in bail bond companies. According to a petition on Change.org, Vanguard invests around $1.4 billion in private prisons and bail bond companies, including insurance companies like Assurant and Fairfax Financial Holdings, which underwrite bail bonds. The petition calls on Vanguard to stop investing in mass incarceration, arguing that private prison companies and bail bond companies only profit when more people are incarcerated or in the criminal court system.

Vanguard has responded to criticism of its investments in the prison industry by stating that prison stocks make up a "very modest" portion of its portfolios and that it would be impractical to eliminate all controversial stocks.

Vanguard's investments in companies with prison involvement

Vanguard is one of the biggest investors in private prisons, along with BlackRock. Vanguard's investments in companies with prison involvement vary across different Vanguard funds.

The Vanguard Total Stock Market Index Fund VTSAX is 20% ($345.71 billion) invested in companies with prison involvement. This fund has been assigned a grade of F by the Prison Industrial Complex screen.

The Vanguard 500 Index Fund VOO is 22% ($278.65 billion) invested in companies with prison involvement. This fund has been assigned a grade of D by the Prison Industrial Complex screen, with 1-2% of the portfolio flagged as higher risk.

Vanguard also invests in insurance companies like Assurant and Fairfax Financial Holdings, which underwrite bail bonds. These companies profit when more people are arrested and out on bail.

Vanguard's investments in private prisons and bail bond companies total around $1.4 billion. Vanguard has stated that prison stocks make up a "very modest" portion of their portfolios and that it would be impractical to eliminate all controversial stocks from their funds.

Vanguard's investments in higher-risk companies

Vanguard is one of the biggest investors in private prisons, controlling over $5 trillion in investments. While the exact percentage of Vanguard funds invested in private prisons is unclear, it is estimated to be around $1.4 billion. This includes investments in companies such as CoreCivic and GEO Group, which own 75% of the private prison industry, as well as insurance companies like Assurant and Fairfax Financial Holdings, which underwrite bail bonds.

Additionally, Vanguard's growth portfolios consist mostly of stocks, which are considered riskier investments than bonds. These portfolios are designed for investors with a high-risk tolerance and a long-term investment horizon. While they offer the potential for high returns, there is also a greater chance of losing money. Vanguard's target-date funds, which are designed for retirement savings, also include a mix of stocks and other higher-risk investments, depending on the investor's time horizon.

Vanguard's investment in higher-risk companies also extends to commodities and alternative investment strategies. Commodities such as oil, gold, and wheat can be volatile, but they offer diversification benefits. Vanguard's Capital Markets Model (VCMM) is a financial simulation tool that forecasts distributions of future returns for various asset classes, including alternative investments. While this tool helps Vanguard make informed investment decisions, it is important to note that past performance does not guarantee future results, and the VCMM may underestimate extreme negative scenarios.

In summary, while Vanguard's investments in private prisons have received significant attention, the company also invests in a range of other higher-risk companies and ventures. These investments are part of Vanguard's diverse portfolio and are aimed at generating returns while managing risk. However, it is essential for investors to carefully consider their risk tolerance and conduct thorough research before investing in any Vanguard funds.

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