Vanguard looking to board the private equity bandwagon

June 26, 2019 | Private Equity
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The mutual fund giant may offer PE strategies to institutional and high net worth clients

Vanguard Group, the mutual fund giant best known for indexing strategies, is weighing an entry into private equity, the Wall Street Journal said.

Vanguard has held talks with Boston firm HarbourVest Partners, London-based Pantheon and other parties over the past months, looking for tie-ups that could help the fund introduce private equity, an alternative investment vehicle, to its wealthy clients.

As traditional investment opportunities shrink, PE beckons

Vanguard may be following in the footsteps of marquee investors such as sovereign-wealth funds and ultra-rich individuals who have already invested many trillions of dollars in private equity.

If the move is successful, Vanguard would be making a major change from its core stock and bond strategies, where intense competition has reduced fund management fees to negligible amounts.

Clients such as pensions and wealth funds are trying to break free of the low returns resulting from the fall in interest rates through the last decade. Private equity, though not as liquid as stocks and bonds, may offer higher returns.

Vanguard CEO Tim Buckley on alternatives: “I’d never say never”

Last month, Mr Buckley said at a press briefing that alternative investments are not entirely ruled out at Vanguard.  “In the alts space there’s some great people, and there are also some crazy strategies,” he said. “We have to make sure we find the right space there.”

Vanguard’s institutional advisory serves assets worth $50 billion, while high-net-worth and other retail clients total $130 billion.

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