Behind the Vanguard, Blackstone, Wellington Plan to Launch Private Investments

There’s a new private-markets tag team in town.

Vanguard and Wellington Management are teaming up with Blackstone to launch private and public assets inside a single investment, a hot-button strategy that has been at the forefront of new launches in the asset management industry this year. While specific plans are slated to come in a few months, the group said hybrid public-private investments address one of the most important challenges facing advisors today: how to build diversified portfolios that can chase higher returns. The latest initiative follows a similar, high-profile launch of the State Street and Apollo ETF last month, and filings from the likes of Capital Group and KKR in October. 

“This is likely the beginning of a wave of frequent, high-profile partnerships moving forward,” said Aaron Filbeck, managing director of the Chartered Alternative Investment Analyst Association.

Where’s the Beef Wellington?

While it’s too soon to tell how the Vanguard and Wellington products will be used, the new multi-asset products will bake in active and index strategies, and could become more core to portfolios than advisors are used to, Filbeck told Advisor Upside. Because the wealth channel is focused on serving multiple households, not a single institutional client, the most useful fund structures are cheap to scale and customizable. Combining private assets into easy-to-use ETFs could also move alts from the “other” bucket to a more prominent seat in the portfolio. “It’s important to remember that advisors currently have this in the mutual fund and ETF wrappers, so any new products will be anchored to that experience,” he said.

Of course, packaging up private assets that don’t price or trade daily into an ETF is much easier said than done. Some advisors say they aren’t sure how the products would be structured, or if the interests of the fund providers will align with their own. That said, advisors are certainly interested, according to Cerulli:

• Almost half of advisors surveyed said they would consider the products if they had more liquidity.
• Some 40% of advisors were also looking for more transparency, and about 1 in 3 were waiting until the products were easier to access. 

Private Party. Filbeck stressed that clients who are interested in private assets will need patience. A decent time horizon will be needed in order to hold private assets to maturity. But it’s not just time: Clients will also need to have the ability and the willingness to lock up those assets. 

“While private markets are not appropriate for every client situation, holding a 100% liquid portfolio may not be the right solution either,” Filbeck said.