Vanguard’s Evolving Allocation Advice

[Markola]

I didn’t want to step on the other thread going about Vanguard’s shifting advice from 60/40 to 70/30, and with more focus on domestic value stocks. Another shift in their advice is toward private equity. To me, their advice to reduce bond allocations is welcomed and long overdue, as bond index funds have gone from “ballast” to “stuck anchor”. I find their emphasis on private equity more disconcerting for some reason, as if their “stay the course” philosophy is floundering. It’s another way they telegraph that maybe their own conviction in it isn’t bedrock.

https://www.thestreet.com/investing/vanguard-makes-a-bold-bet-against-public-markets

A sample from the article:
Vanguard’s long game shifts how wealth is built
Vanguard’s willingness to embrace private markets reflects a fundamental evolution in the asset management industry. The lines between public and private investing are blurring as firms across the spectrum, from BlackRockto Apollo, race to create vehicles that give ordinary investors access to assets once gated behind multimillion-dollar minimums.

For those who do choose to pursue it, the firm recommends diversifying across managers, strategies, vintage years, and geographies while maintaining a consistent commitment schedule rather than attempting to time the market, according to Vanguard. For now, the firm that taught millions of Americans to buy and hold index funds is asking them to consider something more ambitious.

 

[HarveyS]

"Vanguard’s willingness to embrace private markets reflects a fundamental evolution in the asset management industry."
They seem late to the game.
Private markets have been proven to be a fundamental evolution in how to management firms make more money. The jury is out on how the client benefits, but early indications are not looking good.

 

[walkinwood]

How Does the Size of Private Markets Compare to Public Markets? - HarbourVest

Private equity has nearly 25x the companies of public markets with only 12% of the capitalization.

www.harbourvest.com

There are nearly 25x more PE- and VC-backed companies than public markets, but the total capitalization of private equity and venture capital is just 12% of public equity markets.

 

[MichaelB]

I didn’t want to step on the other thread going about Vanguard’s shifting advice from 60/40 to 70/30, and with more focus on domestic value stocks. Another shift in their advice is toward private equity. To me, their advice to reduce bond allocations is welcomed and long overdue, as bond index funds have gone from “ballast” to “stuck anchor”. I find their emphasis on private equity more disconcerting for some reason, as if their “stay the course” philosophy is floundering. It’s another way they telegraph that maybe their own conviction in it isn’t bedrock.

https://www.thestreet.com/investing/vanguard-makes-a-bold-bet-against-public-markets

A sample from the article:
Vanguard’s long game shifts how wealth is built
Vanguard’s willingness to embrace private markets reflects a fundamental evolution in the asset management industry. The lines between public and private investing are blurring as firms across the spectrum, from BlackRockto Apollo, race to create vehicles that give ordinary investors access to assets once gated behind multimillion-dollar minimums.

For those who do choose to pursue it, the firm recommends diversifying across managers, strategies, vintage years, and geographies while maintaining a consistent commitment schedule rather than attempting to time the market, according to Vanguard. For now, the firm that taught millions of Americans to buy and hold index funds is asking them to consider something more ambitious.

The change in allocation referenced in the Vanguard communications a lower allocation to equities and higher to fixed income. From 60/40 equity /fixed to 40/60.

I do agree Vangusrd opening up to private equity is odd and unusual.

 

[engineernerd]

Vanguard is not what it was while John Bogle was alive. I think the current leadership wants to fleece their customers. They've been persistently pushing AUM advice for some time now.

I have no doubt that pushing private equity is in the same spirit, after reading how private equity is in trouble and looking for a patsy to dump their losses onto. Would be interested to know what Vanguard gets when any of us buys that stuff.

If their recommendation to rebalance towards fixed income includes advice about specific fixed-income products they think we should choose, I would likewise be unsurprised if a bit of research shows these products aren't actually the greatest choices for us. To be fair, I don't KNOW - but if they are actively pushing AUM that's really all I need to know to distrust their advice.

 

[target2019]

Vanguard is accelerating their post-Bogle transformation.

Yesterday I received a call from Vanguard. The caller was quick to let me know it was not marketing. Before I could respond he wanted to ask me about my online account profile. I quickly ended the interaction and asked to be placed on do-not-call status.

 

[TheWizard]

I have a very low seven figure account total at Vanguard, targeted at 100% stock funds.
Vanguard has no idea how much yearly income I get from other sources nor how my additional investments at other custodians are allocated.

Nonetheless, I've never really been pressured by Vanguard to do any sort of review of my situation.

So I'm a bit skeptical of the preceding comments...

 

[engineernerd]

I have a very low seven figure account total at Vanguard, targeted at 100% stock funds.
Vanguard has no idea how much yearly income I get from other sources nor how my additional investments at other custodians are allocated.

Nonetheless, I've never really been pressured by Vanguard to do any sort of review of my situation.

So I'm a bit skeptical of the preceding comments...

Until recently the touting of advisory services has been general, not targeted, but just a few days ago a Financial Consultant from Vanguard left me a phone message and sent me this email:

I hope this message finds you well. I’m a Financial Consultant here at Vanguard. I work with clients like you as a point of contact and trusted resource, helping them navigate their financial journey with confidence and clarity. I’m reaching out to introduce myself and to help ensure you’re getting the most value from your relationship with Vanguard. My role is to support clients by taking a comprehensive look at their financial picture, aligning on short- and long-term goals, and helping answer any questions that come up along the way. Whether you’re planning for retirement, reviewing investments, or preparing for life’s transition, I’m here as a resource. If we connect, I can help review your current approach, discuss any questions about your experience with Vanguard, and explore ways we can better support your goals. I’ll plan to reach out by phone in the next few days to introduce myself personally and discuss how we can best work together. If there’s a specific date and time that works better for you, feel free to use the scheduling link in my signature to set up a conversation. I look forward to connecting soon!

 

[TheWizard]

Until recently the touting of advisory services has been general, not targeted, but just a few days ago a Financial Consultant from Vanguard left me a phone message and sent me this email:

I hope this message finds you well. I’m a Financial Consultant here at Vanguard. I work with clients like you as a point of contact and trusted resource, helping them navigate their financial journey with confidence and clarity. I’m reaching out to introduce myself and to help ensure you’re getting the most value from your relationship with Vanguard. My role is to support clients by taking a comprehensive look at their financial picture, aligning on short- and long-term goals, and helping answer any questions that come up along the way. Whether you’re planning for retirement, reviewing investments, or preparing for life’s transition, I’m here as a resource. If we connect, I can help review your current approach, discuss any questions about your experience with Vanguard, and explore ways we can better support your goals. I’ll plan to reach out by phone in the next few days to introduce myself personally and discuss how we can best work together. If there’s a specific date and time that works better for you, feel free to use the scheduling link in my signature to set up a conversation. I look forward to connecting soon!

That's fine.
If you're possibly in need of that service then go with it.
I'm not.
I'll ignore their call...

 

[Markola]

The change in allocation referenced in the Vanguard communications a lower allocation to equities and higher to fixed income. From 60/40 equity /fixed to 40/60.

I do agree Vangusrd opening up to private equity is odd and unusual.

You’re right. I misunderstood. Wow. To my way of thinking, that’s even worse advice if an investor wants to overcome inflation.

 

[target2019]

Is the OP article title not accurate?

"Vanguard makes a bold bet against public markets

The index fund giant forecasts that top private equity managers will outpace stock portfolios."

Or maybe the thread has shifted?

 

[Markola]

? Thread title is “Vanguard’s Evolving Allocation Advice.” Seems accurate enough to me.

 

[engineernerd]

That's fine.
If you're possibly in need of that service then go with it.
I'm not.
I'll ignore their call...

It'll be a cold day in h*** before I voluntarily sign up for that service!!! This guy was cold-calling (and emailing) me out of the blue.

Vanguard has absolutely no evidence that I would be interested in this, all I've ever asked them for help with during my multiple-decade tenure as a self-directed customer was how-to-get-something-done (technical) advice.

My point stands, Vanguard IS pushing AUM advice.

I checked on the website and an FAQ shared that they do not provide free advisory service, it's all AUM (except for the articles on the website which anyone can read).

I also googled the guy's name, and it seems he really does work for Vanguard, in marketing.

 

[engineernerd]

Vanguard is accelerating their post-Bogle transformation.

Yesterday I received a call from Vanguard. The caller was quick to let me know it was not marketing. Before I could respond he wanted to ask me about my online account profile. I quickly ended the interaction and asked to be placed on do-not-call status.

Hmmm... could it have been a scammer?

 

[MichaelB]

You’re right. I misunderstood. Wow. To my way of thinking, that’s even worse advice if an investor wants to overcome inflation.

Well, their asset class outlook shows fixed income returns a bit closer to equities, so the shift in allocation from equity to fixed is consistent.

I agree with your comment that it weakens the protection against inflation.

I don’t want to hijack the thread topic, which I find interesting, Vanguard getting into private markets. My first reaction to that is negative, and after thinking about it, it’s more negative.

 

[braumeister]

Vanguard getting into private markets. My first reaction to that is negative, and after thinking about it, it’s more negative.

Makes me think about John Bogle turning over in his grave about this. Probably up to about 250 rpm by now.

 

[target2019]

Hmmm... could it have been a scammer?

The number came up as Vanguard. I'll have to check that again. Thanks.

 

[Markola]

When the private equity topic started bubbling at Vanguard a few years ago, I happened to catch an episode of the Bogleheads On Investing podcast, in which host Rick Ferri expressed some skepticism about it. He commented that owning a small cap value index fund approximates the private equity strategy Vanguard was proposing, with much lower fees. I can’t say how accurate that comment is, but both “10 year” and “since inception in 1999” returns are about 10% annually. VSIIX-Vanguard Small-Cap Value Index Fund Institutional Shares | Vanguard