Vanguard announced it is launching a private-equity fund. Initially, the fund will only be offered to endowments and foundations, but Vanguard plans to open its private equity fund up to wealthy individuals in the future.
Is Vanguard’s move a sign of froth in the private equity space, or trouble with the hurdles required to come public? Probably both, but the number of IPOs in the U.S. has plummeted since the dotcom bust and it still hasn’t recovered. The cost and hassle of being a publicly-traded company has made staying private or going private more attractive.
Dawn Lim reports at The Wall Street Journal:
Vanguard’s new private-equity initiative follows feedback from some institutional customers. The firm oversees $1.6 trillion for institutions, of which roughly $50 billion is managed through its advisory platform.
Vanguard’s move shows the pull of alternative investments to all kinds of investors. In recent decades, pensions and endowments have plowed trillions of dollars into private equity in search of higher returns. That migration of money has reshaped capital markets, shrinking the number of publicly listed U.S. companies while also raising questions about whether many people are being cut out of a growing source of wealth.
Vanguard is also facing new pressure on a key business as a fee war between asset managers has pulled the cost of its most commonly offered index products to near zero. It is battling other major firms such as Charles Schwab Corp. and Fidelity Investments to be the go-to platform for investors.
The fund Vanguard is launching will invest in a mix of different fund strategies from those focused on controlling stakes in unlisted firms to venture investments in younger companies.
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