You know I’ve been hard on Vanguard. Your Survival Guy is worried about Vanguard’s size, and its new CEO is looking for ways to increase fees. I’m also worried about private equity looking for ways to offload assets that institutions don’t want anymore onto retail investors.
So you can imagine I was not surprised to see that Vanguard is preparing new products with private equity giant Blackstone. According to The Wall Street Journal, Vanguard, Blackstone, and other asset managers are attempting to “democratize investing.” But it’s not all out of the goodness of their hearts. Matt Wirz and Anne Tergesen explain:
But the investment firms have something to gain for themselves in this shift. After years of driving down fees, retail fund managers are nearing a wall as what they charge approaches zero. The chance to sell more funds that can charge higher fees would boost revenues for the likes of Vanguard and State Street, which pioneered exchange-traded funds.
“They have been preaching low fees and competition, and now they’ve come around to the value of alternative investments in client portfolios,” said Morgan Stanley analyst Michael Cyprys.
The companies that create and manage the private funds—Blackstone, Apollo, KKR and others—are hitting their own wall as their private-equity funds, which own unlisted companies, stall. They have focused on private credit, which involves issuing loans to those same sorts of companies, to generate growth. The trillions in savings held by retail fund managers looks like enticing fuel for their businesses.
Action Line: Beware of being used as a dumping ground for private equity assets that pension funds are no longer interested in. As a reward for taking them off institutional investors’ hands, you’ll be charged high fees. Instead, look to build a portfolio of individual stocks and bonds with the help of a fiduciary who is legally bound to put your interests first. When you want to talk about your portfolio plan, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
