Fund company Vanguard has announced it will let qualified individual investors access a private equity strategy directly through the company.
This strategy will be available to eligible non-advised Vanguard clients this summer, and will later be open to eligible advised clients of Vanguard Personal Advisor Services, its hybrid platform that combines an online experience with a human advice relationship. The private equity offering is a partnership between Vanguard and HarbourVest, a private markets investment specialist with roughly $76 billion in assets under management.
To participate in this strategy, individuals must either be a qualified purchaser with at least $5 million in investments or be an accredited investor with a net worth of at least $1 million or an annual income of more than $200,000 (or $300,000 together with a spouse or domestic partner).
Early last year, Vanguard and HarbourVest partnered to offer a private equity strategy to pensions, endowments and foundations through Vanguard Institutional Advisory Services. That is now being expanded to include qualified retail investors.
A Vanguard spokesman said the institutional program has exceeded expectations, but he wouldn’t disclose specifics about the target size, assets or funds raised on the institutional side. Nor did he disclose details about the retail side as far as the strategy being offered or the expected fees.
“Vanguard has long been known for lowering fees, but we’ve also been focused on creating net outcomes for clients and on delivering value for them,” the spokesman said. “For people with the time horizon and the eligibility requirements for private equity, we see this as a great option to potentially and meaningfully improve their outcomes.”
While many financial advisors love Vanguard’s low-cost fund products, some view its expanding advisory business as a competitive threat.
“We’re not big in the non-liquid private equity space, but a lot of advisor firms are,” said Tom Meyer, CEO at Meyer Capital Group, a wealth management firm in Marlton, N.J.
“Vanguard wants to attract higher-net-worth clients, so can that be competition for advisory firms that use private equity?” Meyer asked. “It could be. Look, these guys are disruptors.”
Daniil Shapiro, an associate director at Cerulli Associates, sees this latest move by Vanguard as part of an ongoing trend in the wealth management space.
“Vanguard’s move is in line with the democratization of alternatives theme which gives a broader base of clients access to products that were previously reserved for institutions,” Shapiro said via email.
“We believe this is primarily a way to provide investors with what they want as opposed to one meant to compete with advisors who are themselves able to access a variety of alternative investment options,” Shapiro noted. “We don’t expect clients to switch financial advice providers to gain access to this exposure.”