Malvern-based investment giant Vanguard is taking the return to work slowly — very slowly.

Over the next few months, Vanguard staff in Pennsylvania, Arizona, North Carolina and other U.S. locations will begin returning to their offices after working from home amid the coronavirus pandemic, Vanguard spokeswoman Dana Grosser said.

“The health and safety of our crew, as well as our ability to continue serving our global clients, is top of mind as we begin determining how and when to return to campus. Vanguard is anticipating a phased approach, which will differ by region, and is working closely with government officials and medical professionals to identify the conditions under which we can have crew safely return to our offices. We expect the first phase to consist of a modest number of business-essential crew returning to their offices over the course of several months," she said in an emailed statement.

Vanguard has 19 locations worldwide with about 17,600 employees, according to the latest figures.

Those employees who are not able to return, or who do not feel comfortable doing so, will be allowed to continue working from home.

Vanguard’s “phase two” return will involve “a large segment of crew around the globe, and the third phase will mark a full return to campus. While the exact timing of these initiatives has yet to be determined, Vanguard is committed to be thoughtful and prudent in our approach,” Grosser said.

Are you a Vanguard employee? How do you feel about returning to work in your office? Let us know.

Private equity in 401(k)s

The Department of Labor issued a surprise ruling this month: 401(k) retirement plans can start offering private equity on the menu of investment offerings.

Yes, that’s right: In addition to plain vanilla stock-and-bond mutual funds, ETFs and index funds, Main Street investors are now allowed to invest in private equity.

Vanguard is among the firms singing the praises of private equity, which often means investing in private companies directly or engaging in buyouts of public companies. In the midst of the DOL ruling, Vanguard’s head of private markets, Fran Kinniry, gave an interview saying the firm of $6 trillion in assets, considered the world’s low-cost fund company, will offer high-fee private equity funds as part of target-date retirement funds.

“Research shows investors can improve their outcomes if they had some position in private investments” over a long term, say, a decade or more, he said in a Morningstar podcast.

“Do you need 100% of your portfolio liquid every single day? An investor with a 20-, 30-, 40-year horizon” could have “some portion” of investments, perhaps 15% or 20% of their portfolio, in private equity.

Vanguard began offering PE to endowments and foundations first, and is now offering it to high-net-worth investors, Kinniry said in the April interview.

What are the benefits? “You’re investing with the founders. Managers doing this for the longest amount of time, and raise the most money, get the first call, or first access to the “top private-equity funds,” Kinniry said.

Other disagree.

“It’s ridiculous,” said Jeffrey DeMaso, research head at Adviser Investments, which manages money for Vanguard investors and issues a monthly newsletter on Vanguard funds.

The firm is “holding private equity out as some magical asset that’ll deliver high returns and solve all retirement-saving problems. The bottom line is that the average private equity fund isn’t worth it" due to the higher fees, lack of liquidity and transparency, he added.

“Normally, you’d expect Vanguard warning that this is not a good deal for the average 401(k) investor. Instead, they’ve got Fran Kinniry suggesting that investors put 15% to 25% of their portfolios in illiquid securities, meaning private equity," DeMaso said.

Fees still dropping

Vanguard’s fees continue to drive the entire industry lower, according to a recent report from Morningstar. And although that’s good news for investors, it means Wall Street firms may be looking for other sources of revenue, including private equity.

Vanguard continues to drive investment fees lower, according to a June 2020 report from industry observer Morningstar.
Morningstar
Vanguard continues to drive investment fees lower, according to a June 2020 report from industry observer Morningstar.

Among the ranks of the largest asset managers, “Vanguard continues to own the low-cost crown,” the Morningstar research report found.

In 2019, the firm’s asset-weighted expense ratio was 0.09%, down from 0.10% in 2018. Vanguard was followed by State Street Global Advisors (0.16%) and BlackRock/iShares (0.27%).

However, Vanguard’s competition gained ground in 2019. While the firm remains the overall low-cost leader, its competitors either matched or undercut the firm’s fees for certain broad market-cap-weighted index funds. As these firms “jockeyed for position, investors have come out in front, benefiting from an ever-wider menu of ever-cheaper options offering wide market exposure.”