Vanguard is to offer access to private equity in a move aimed at bringing meaningful competition on fees into the most profitable sector of the investment industry for the first time.
Pennsylvania-based Vanguard has agreed a strategic partnership with HarbourVest, a US$68 billion private market specialist, to provide qualified investors with access to private equity.
“Private equity will complement our leading index and actively-managed funds, as we seek to broaden access to this asset class and improve client outcomes,” said Tim Buckley, chief executive of Vanguard, the world’s second largest asset manager.
The new strategy will initially be available only to institutional clients including pension funds, endowments and foundations, but Buckley said Vanguard would aim to expand access to private equity to a wider range of investors over time.
“For individual investors in particular, this partnership will present an incredible opportunity — access and terms they could not get on their own,” he said.
Vanguard has established a reputation as a ferocious price competitor, relentlessly cutting fees to win new business away from rivals. Private equity managers operate more costly “two and 20” fee structure and have entirely escaped the cutthroat price competition which has spread across the traditional mutual fund industry.
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The new private equity strategy will initially be provided by Vanguard Institutional Advisory Services to pensions, endowments and foundations as part of an ongoing effort to further expand the suite of products for these clients.
John Toomey, managing director at HarbourVest, said the partnership with Vanguard was a “natural extension” to its existing business.
“We look forward to expanding access to private equity to help strengthen returns for qualified investors,” said Toomey.
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