Vanguard to offer private equity

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I Shrugged
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Vanguard to offer private equity

Post by I Shrugged » Tue Sep 07, 2021 8:41 am

I’ll be interested in seeing how this goes over at Bogleheads.

Clip from an email from vanguard:

Now you can access private equity through Vanguard

Vanguard is proud to partner with HarbourVest, a world-class global private equity firm, to offer you a unique opportunity to access this distinct and growing segment of global equities. HarbourVest is an innovative firm with a history of producing consistently strong investment results. have to check in at Bogleheads to see how they check this form out
D1984
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Re: Vanguard to offer private equity

Post by D1984 » Tue Sep 07, 2021 9:55 pm

I Shrugged wrote:
Tue Sep 07, 2021 8:41 am
I’ll be interested in seeing how this goes over at Bogleheads.

Clip from an email from vanguard:

Now you can access private equity through Vanguard

Vanguard is proud to partner with HarbourVest, a world-class global private equity firm, to offer you a unique opportunity to access this distinct and growing segment of global equities. HarbourVest is an innovative firm with a history of producing consistently strong investment results. have to check in at Bogleheads to see how they check this form out
I recall reading something about this in May or June. They (Vanguard) did say that it would only be available to accredited investors; I don't know how strictly they check this. I recall there were some laws/regulations a few years back (IIRC it was the JOBS Act) that stated that from 2017 onward sellers of investments in PE, VC, seed funding, hedge funds, 144 and 144A securities, etc and other non-publically traded securities were supposed to take "reasonable steps" to verify that anyone who invested with them did in fact meet the financial criteria (either net worth or income) of being an "accredited investor"; before this legislation all you actually had to do was click an online form or sign a boilerplate paper letter stating that you were an accredited investor and that was considered proof enough; it was basically all winks and nods and "if you say you are then we won't exactly bother doing anything to actually check". How Vanguard and other companies nowadays interpret "reasonable steps" I do not know.

As per https://parallelmarkets.com/blog/a-guid ... on-process it appears that one now is supposed to submit documention proving one's income and/or net worth (bank statements, brokerage statements, proof of title to real estate, pay stubs, tax documents like 1040s, etc. It also appears that the companies offering the accredited-investor only investments are supposed to take these documents at face value as reasonable proof without actually bothering to verify them i.e. there is no, say, Form 4506-T like there is when you get a mortgage that would allow them to actually truly verify that your claimed income is high enough to reach accredited investor status. As such, anyone with access to a scanner, printer, tax preparation software, Excel, and possibly Photoshop (or even MS Paint) could become an "accredited investor" with about 10-20 minutes work. Not that I'm suggesting anyone actually do this but if the offerors of accredited-investor only investments don't actually bother verifying anything......

In addition to the above, do you know what the "gating" or withdrawal restrictions on such PE funds offered by Vanguard and Harbourvest are? Quarterly lockup? One year lockup? Five year lockup? Interval fund structure with no official lockup but where only a certain percentage of the investment (typically with interval funds it varies between 5% and 20% ) can be liquidated in any given quarter? PE as a portfolio diversify works best when you can at least rebalance it somewhat against other risk asset classes; it doesn't work nearly as well if you can't buy/sell it when stocks are up/down or vice versa.
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Re: Vanguard to offer private equity

Post by I Shrugged » Wed Sep 08, 2021 6:29 pm

No, I don't know how VG proposes to handle any of it. I don't know if we are interested but it would be nice to know more. I should look into it at some point. I wouldn't view it as part of the pp at all. More like a business investment.
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