Vanguard chief investment officer Gus Sauter is retiring

— -- Vanguard chief investment officer Gus Sauter, architect of many of Vanguard's index funds, will retire at the end of the year, the Valley Forge, Pa. fund company says.

"Vanguard was (company founder) Jack Bogle's vision, and Sauter executed it," says Dan Wiener, publisher of The Vanguard Mutual Fund Advisor, a newsletter.

Sauter, 57, oversees $1.6 trillion in assets at Vanguard. He joined Vanguard in 1987, when the company had two index funds with assets of $1 billion. Vanguard's index funds have $1.1 trillion in assets now.

An index fund is a stock or bond mutual fund designed to mirror the performance of a specific stock or bond index. By avoiding active management, they can closely track market performance and keep expenses low.

Mortimer J. "Tim" Buckley, 43, managing director, will succeed Sauter as chief investment officer. Buckley joined Vanguard in 1991 as an assistant to Bogle. He's currently a member of Vanguard's Portfolio Review Group, which oversees Vanguard's in-house investment management.

Why is Sauter retiring so young? "After this many years, he's probably smelling the roses," Wiener says. "It's an exhausting job, he's done it for a long time, and he's made a lot of money."

Vanguard recently announced that its 2011 Partnership Plan distribution, the company's reward system for all employees, would rise more than 10% from 2010 levels, Wiener says. "People think that because Vanguard is low-cost, they don't pay well. They pay their executives very well," Wiener says.