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Vanguard, Blackstone, and Wellington Management launched their first two funds today as part of the “alliance” they established last year to collaborate on providing investors with easier access to private and public markets.
The companies’ WVB All Markets Fund provides investors with access to multiple asset classes and both passive and active strategies from all three partners in a single fund. The WVB Blackstone All Privates Fund offers access to Blackstone’s private markets platform, including private equity, private infrastructure, private real estate, and private credit in a single fund.
The WVB All Markets Fund and WVB Blackstone All Privates Fund are closed-end funds with limited liquidity. The WVB All Markets Fund is an interval fund; investors can only redeem a certain percentage of shares quarterly. That structure allows fund managers to invest in illiquid assets, but it may be an off-putting characteristic for investors who prefer daily liquidity.
Access to these funds won’t come easily, at least initially. The companies say that the funds will only be available to clients of Bank of America’s Merrill and private bank units for a period of time. Merrill is one of the nation’s largest wealth management businesses. Both funds will be made available to other wealth management companies at a later date, the partners say.
Wellington, Vanguard, and Blackstone say the WVB All Markets Fund and WVB Blackstone All Privates Fund are meant to help financial advisors build diversified long-term portfolios for wealthy and affluent clients.
The three companies say they intend to “explore additional distribution opportunities” in the future and they anticipate broad adoption from registered investment advisors. RIAs are one of the fastest-growing sectors within the wealth management industry.
The WVB All Markets Fund brings together Wellington’s expertise in active public equities, Vanguard’s strengths in active fixed income and index strategies, and Blackstone’s private markets expertise, the companies say. The fund will invest its assets in public equities in the range of 40% to 60%; fixed income 15% to 30%; and private market investments between 25% to 40%, according to a June 30 filing with the Securities and Exchange Commission.
“We feel there is a role for indexing, for active, and for privates as well,” President and CIO of Vanguard Greg Davis tells Barron’s. He says the companies think that the fund can be a core holding for a long-term portfolio, helping to provide balance across asset classes.
The WVB All Markets Fund has multiple share classes and total annual fund expenses after a fee waiver and expense reimbursement range from 1.14% to 1.89%, according to the filing.
The WVB Blackstone All Privates Fund, as its name suggests, intends to provide investors with access to a diversified basket of private assets. It is a tender offer fund. Total annual fund expenses after expense reimbursement range from 1.43% to 2.28%, depending on the share class, according to a July 1 filing with the SEC.
Some financial professionals argue in favor of investing in private markets as more companies have been choosing to stay private for longer, if they ever go public. SpaceX’s historic initial public offering came 24 years after the company was founded. Although there has been a recent uptick in IPOs, the number of publicly traded companies is still half of its peak in 1997, according to the Center for Research in Security Prices. Investing in private securities in other asset classes, such as private credit, can offer investors income as well as greater portfolio diversification, advocates say.
But access to private markets can be tricky as access is often restricted to wealthy investors. Critics note that investing in private assets can also come with exorbitant fees; private markets are less transparent than public markets; and the illiquid nature of private assets can be more than a minor inconvenience when investors want a quick exit, as many discovered this spring when some private credit funds limited redemptions.
Still, investing in private assets, particularly private companies, is appealing to some wealthy investors and their financial advisors.
Jean M. Hynes, CEO and managing partner of Wellington Management, says her company, Vanguard, and Blackstone are exploring additional investment offerings. She acknowledges that having three companies collaborating on an investment product can be complex, but says the journey has gone smoothly. “This alliance is really about bringing three firms together that have great expertise,” she says.
Write to Andrew Welsch at [email protected]