The Vanguard Group, known for its passive, low-cost mutual funds and ETFs, has reportedly held talks with two of the world’s biggest private equity companies about offering private assets to investors.
Vanguard, which manages $3.1 trillion in 88 U.S.-issued ETFs, in recent months has discussed private asset agreements with Blackstone Inc. (BX) and Carlyle Group Inc. (CG), Bloomberg reported, citing sources familiar with the talks. No deal to market private assets jointly with Carlyle or Blackstone has been finalized, Bloomberg reported, and none of the firms commented on the anonymously sourced story.
Vanguard has long been known as the everyman’s investing partner, with a large choice of passive, low-cost mutual and exchange-traded funds and thousands of followers called "Bogleheads" after the company’s founder, Jack Bogle. While a tie-up with an elite, white-shoe financial firm may or may not challenge that reputation, the suggestion of such comes as a surprise to the firm’s long-time watchers.
“It seems out of left field,” etf.com Senior ETF Analyst Sumit Roy said. Roy noted that while Vanguard doesn’t permit trading of spot bitcoin ETFs because it feels they aren't appropriate for long-term portfolios, questions remain about whether private assets “are appropriate for individual investors and, if they are, how those assets are offered to individuals.”
PRIV, Private Equity Suitability
The suitability of private assets in ETFs was raised earlier this year after State Street and Global Management launched the SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV) which aims to invest in private credit among other instruments. A day after the fund launched, the Securities and Exchange Commission raised concerns over the fund’s liquidity risk management program and the use of Apollo in its name.
Vanguard, with $10.4 trillion in assets, currently offers private equity to clients through a pact with HarbourVest, Bloomberg said, adding that the partnership manages $2.4 billion as of the end of last year.
“It's like letting the low cost fox inside the high cost hen house,” Bloomberg ETF analyst Eric Balchunas tweeted, adding that “ETFs could threaten revenue while exposing the mark to magic system.”