As Vanguard pushes into private equity, some fans get queasy

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Breaking Away
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As Vanguard pushes into private equity, some fans get queasy

Post by Breaking Away »

“As Vanguard pushes into private equity, some fans get queasy”

MarketWatch 12/6/2021


“Vanguard built its reputation on democratizing investing, bringing institutional products to the masses and doing so cheaply. Its retail-investor-friendly moves – index funds and low fees — have endeared it to millions of investors.

But the asset manager’s recent push into private-equity markets is giving some fans pause.

Some advisers think Vanguard’s entry into private equity underscores that the firm is no longer the firm founded by Jack Bogle in 1975.

“I suspect [Bogle] will roll over in his grave” if he was asked about the private-equity foray, said Allan Roth, certified financial planner and founder of Wealth Logic, an investment advisory and financial planning firm in Colorado Springs, Colo.”



https://www.marketwatch.com/story/as-va ... =home-page
Tinyz
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Tinyz »

Things change and everything will change. Management change is one of a factor that determines how a company will run. Vanguard is a company first and foremost and if the management believe that private equity is one of the asset to generate revenue for the company then so be it. I think boglehead, especially this forum sometimes feels like a dangerous place to be suck into. If you are not with me, you are wrong. Not sorry to be blunt but this comes from someone that is not from US. :annoyed

inb4 locked :sharebeer
Last edited by Tinyz on Mon Dec 06, 2021 8:09 pm, edited 1 time in total.
UpperNwGuy
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by UpperNwGuy »

I am queasy. My view is completely the opposite of the previous poster.
Last edited by UpperNwGuy on Mon Dec 06, 2021 8:11 pm, edited 1 time in total.
000
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by 000 »

I'm feeling seasick.
dbr
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by dbr »

I do not imagine the basic low cost index funds offered by Vanguard are going to go away, meaning I am not queasy about my investing. There is certainly enough competition for assets that low cost funds are here to stay. I don't hold my accounts at Vanguard or consult them for advice.

This could mean that suggesting that new investors seeking advice might try Vanguard PAS could become dubious advice.
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JoMoney
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by JoMoney »

Mr. Bogle had lots of disagreements with Vanguard.
Vanguard offering "Private Equity" seems to me like if Walmart selling cigarettes. It's not something anybody needs, but if they do it at lower cost, I guess at least they're doing it cheaper :?
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celia
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by celia »

I’m a DIY investor. I don’t care who their target audience(s) are. I’m going to continue doing DIY, using Vanguard funds.
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tetractys
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by tetractys »

Vanguard isn’t disclosing the cost to investors. It will be higher than typical expense ratios though and will include a percentage of gains on top of that. Also there will be a lock in period of possibly several years. Admittance will probably be for flagship at a minimum.

So if you want to lock up a million plus for 10 years or more and see what happens, this might be for you!
sandan
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by sandan »

Vanguard has been diversifying its services and marketing strategy (to match the competition) for quite some time. A bit late to be queezy.
Last edited by sandan on Mon Dec 06, 2021 9:31 pm, edited 1 time in total.
saintsfan342000
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by saintsfan342000 »

I'm happy to let them develop and sell expensive, profitable products to others if it means I can keep buying low-cost, excellently-managed index mutual funds (or if it helps them improve their customer service). I have about the same amount of money invested at Fidelity, and that's how they play ball.
Already impartial now...and you have a nice day.
roth evangelist
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by roth evangelist »

Why should anyone care? Are they getting rid of the total stock market fund? No. Are they going to force you to invest in private equity funds? They can't.
mikejuss
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by mikejuss »

I don't get what the big deal is: private equity will be an offering, not something anyone is forced to sign up for. Yes, it's a bad look for a place like Vanguard, but that's all it is.
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criticalmass
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by criticalmass »

What reward/risk does unregulated private equity offer Vanguard customers that existing access to funds, EFTs, and securities does not already provide to investors? Perhaps we can expect (private) equity index funds?
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by mikejuss »

criticalmass wrote: Mon Dec 06, 2021 10:42 pm What reward/risk does unregulated private equity offer Vanguard customers that existing access to funds, EFTs, and securities does not already provide to investors? Perhaps we can expect (private) equity index funds?
High risk and high reward? That's not my cup of tea, but it may be attractive to others.
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Tamalak
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Tamalak »

My policy is to buy the haystack. There's more to the haystack than stocks. To the extent Vanguard is able to break into other kinds of equity, I'm excited.
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Nate79 »

delete.
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Nate79
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Nate79 »

mikejuss wrote: Mon Dec 06, 2021 10:02 pm I don't get what the big deal is: private equity will be an offering, not something anyone is forced to sign up for. Yes, it's a bad look for a place like Vanguard, but that's all it is.
If it ends up in their target date funds will you change your mind?
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Broken Man 1999 »

Some fans got queasy when ETFs were first offered by Vanguard.

Seems Vanguard has done pretty darn well in ETFs, despite Mr Bogle turning down the opportunity to roll them out.

Me, I don't believe Mr Bogle would have stood pat and allowed his creation to become an also-ran company hawking only mutual funds.

In business you adapt or die.

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Rick Ferri
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Rick Ferri »

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MNSooner
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by MNSooner »

Nate79 wrote: Tue Dec 07, 2021 8:32 am
mikejuss wrote: Mon Dec 06, 2021 10:02 pm I don't get what the big deal is: private equity will be an offering, not something anyone is forced to sign up for. Yes, it's a bad look for a place like Vanguard, but that's all it is.
If it ends up in their target date funds will you change your mind?
Especially if the target date fund is not in a tax-deferred account.

I feel for anyone in that situation. They must either pay taxes to get out, or pay Vanguard their Danegeld.
dbr
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by dbr »

MNSooner wrote: Tue Dec 07, 2021 10:19 am
Nate79 wrote: Tue Dec 07, 2021 8:32 am
mikejuss wrote: Mon Dec 06, 2021 10:02 pm I don't get what the big deal is: private equity will be an offering, not something anyone is forced to sign up for. Yes, it's a bad look for a place like Vanguard, but that's all it is.
If it ends up in their target date funds will you change your mind?
Especially if the target date fund is not in a tax-deferred account.

I feel for anyone in that situation. They must either pay taxes to get out, or pay Vanguard their Danegeld.
It can be a reason to be careful about TD funds is that the vendor changes what is in the fund and the investor may not be clear on what is happening. But I don't think that is the case yet.
MathWizard
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by MathWizard »

One risk that we have in "buying the market" is that we can only buy in the public market.

I am very much not a fan of private equity, but one potential demise of the low cost index fund
approach is if private equity buys up a majority of the companies.

I see Vanguard's move this as a response to that risk. You don't have to invest in those funds, but
they will be available to you (at least to an accredited investor).

Do you have some concerns about Vanguard's viability with this move?
I would like to hear about how this might affect that viability, since it affects my investments,
but I don't see how it would.
If it does diminish the viability, then this is actionable: Move away from Vanguard.

If this is just "Vanguard has strayed from the path" then I do not think that this is actionable.
Last edited by MathWizard on Tue Dec 07, 2021 10:41 am, edited 1 time in total.
Broken Man 1999
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Broken Man 1999 »

Nate79 wrote: Tue Dec 07, 2021 8:32 am
mikejuss wrote: Mon Dec 06, 2021 10:02 pm I don't get what the big deal is: private equity will be an offering, not something anyone is forced to sign up for. Yes, it's a bad look for a place like Vanguard, but that's all it is.
If it ends up in their target date funds will you change your mind?
We held Target Retirement funds for some time but changed to individual holdings to save expenses.

Vanguard would have lost me as a customer of Target Retirement funds when they added international bonds, anyway.

I expect Vanguard will do well in their efforts, though I have no interest in the product, myself.

Broken Man 1999
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bondsr4me
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by bondsr4me »

celia wrote: Mon Dec 06, 2021 8:26 pm I’m a DIY investor. I don’t care who their target audience(s) are. I’m going to continue doing DIY, using Vanguard funds.
+100...totally agree with the above....I use ETF's.
sschoe2
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by sschoe2 »

As long as they still have my index funds VTI, VXUS etc I don't really care what else they carry.
afan
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by afan »

tetractys wrote: Mon Dec 06, 2021 9:02 pm Vanguard isn’t disclosing the cost to investors. It will be higher than typical expense ratios though and will include a percentage of gains on top of that. Also there will be a lock in period of possibly several years. Admittance will probably be for flagship at a minimum.

So if you want to lock up a million plus for 10 years or more and see what happens, this might be for you!
I read the article as saying that the minimum was $500k and the lock in was 14 years. The percent of assets and profits I read as descriptive of the field on average, not specifically what this particular deal would do.

If I am correct, one should be far better off than required for accredited investor or qualified purchaser before going for it.

I am not at convinced that PE is worth investing in at all. As best I can tell, funds that have initial success raise other funds on that basis but that performance does not persist. That means high fees.and no liquidity without a rational expectation of better risk adjusted returns. There are abundant data saying this, so it would take a lot to convince me otherwise.

For now, I will pass.

Since the federal requirements limit who could participate, I suspect only a small fraction of PAS clients would be eligible. Given the risks, I also suspect that Vanguard will be cautious in recommending PE to people who can easily sleep at night without worrying about the return on a lousy half million dollar investment.

Why offer it at all? I assume customers or their advisers requested it. Vanguard certainly is not marketing it to the wider world.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
afan
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by afan »

No. I do not see this as posing any threat to Vanguard's viability. It could be a threat to their reputation if the fund craters spectacularly. Otherwise, the cap weighted, "market is efficient" investors will ignore it completely.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by sunnywindy »

It is possible this fund could save some institutions like colleges and large non-profits a lot of fees versus investing in other PE funds. So, if your kids or the vulnerable people in your community use the services of non-profit institutions, you could benefit indirectly because Vanguard's PE fund increased the return of the subscribing institution.
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by inbox788 »

sschoe2 wrote: Tue Dec 07, 2021 11:39 am As long as they still have my index funds VTI, VXUS etc I don't really care what else they carry.
I'm less sensitive to other funds, good or bad, that Vanguard carries, but I certainly wouldn't want more bad funds to have to sort out myself and especially if spouse or others have to take over management.
Broken Man 1999 wrote: Tue Dec 07, 2021 10:40 amWe held Target Retirement funds for some time but changed to individual holdings to save expenses.

Vanguard would have lost me as a customer of Target Retirement funds when they added international bonds, anyway.

I expect Vanguard will do well in their efforts, though I have no interest in the product, myself.
Looks like Evergrande is like Puerto Rico bonds, or maybe worse.

I prefer Vanguard for the time being, but if they keep adding bad, difficult, confusing and expensive products, they will lose the current advantage they have and just lead to churn.
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Nathan Drake »

Private Equity is just Small Cap Value - 2/20 fees + lockup

No thanks, I’ll just invest in cheap SCV funds instead like AVUV
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59Gibson
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by 59Gibson »

What a sell..."you are too liquid".ok so PE is the answer? Yes. Oh yeah Let the good times roll!
Dave55
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by Dave55 »

No thanks to Vanguard PE. Rick Ferri's discussion with Ted Aronson about this is worth the listen.

Dave
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CZjc1330
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Re: As Vanguard pushes into private equity, some fans get queasy

Post by CZjc1330 »

Well, if I were 20 yrs younger might consider investing. It seems to me to be just another Hedge Fund and I have been sniffing around

What concerns me is that is it a definite move away from the founding principles of Vanguard and certainly Jack Bogle.
He is indeed turning in his grave.
The move is radical and mimics what others are doing - make more money, not serve the public. Vang was founded to be different.

Yes, it is a leak in our ship. We aren't going to sink but taint a good idea to deviate from founding core principles. Bad old fashion greed will permeate all of Vang in a few short years. You'll see.
Or I may be overreacting and wrong to boot!
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