Private Equity: Count Vanguard in as a Competitor in the Space
Vanguard, the world’s largest investment firm, has entered the private equity business. The firm will provide PE in a suite of new funds and target pensions, endowments, and other institutions. The company forged a partnership with HarbourVest to offer “qualified” investors with access to new funds. HarbourVest manages roughly $68 billion in assets.
“We are entering the private-equity market the Vanguard way — partnering with a world-class adviser to provide a high-quality offer,” Vanguard CEO Tim Buckley said in the statement.
This is a significant shift for the company best known for its mutual funds and low-cost ETFs. Known for its lower costs, it will be interesting to see how it charges customers, and whether it will put pressure on fees for its competitors.
Vanguard Goes to Private Equity
Meanwhile, it’s worth noting that this isn’t Vanguard’s first venture into the private equity space. In 2001, the firm attempted to launch PE funds but fell short of capital raising goals. At the time, it worked with Hamilton Lane Advisors to establish a fund of private equity funds. At the time, it said it would charge just 0.85% (with Hamilton Lane taking more than half of the fees). However, it later revealed that fees would also go to funds insider portfolio and to fund advisers in the form of profit fees. It had planned to raise more than $100 million. However, it never raised this money.
This time will be different. The company has grown, alternatives are also hot, and PE appears to be the inevitable turning point for a firm with $6.2 trillion in assets under management.
“Private equity will complement our leading index and actively managed funds,” Buckley said. “While this strategy will be initially available to institutional advised clients, we aim to expand access to investors in additional channels over time.”
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