Wealth Management

Access private equity through Vanguard

Introducing HarbourVest

Vanguard's partnership with HarbourVest, a world-class global private equity firm, offers you a unique opportunity to access a distinct and growing segment of global equities.

To learn more about investing in private equity, contact your relationship team.

Schedule an appointment with your advisor

Schedule an appointment with your relationship manager

To learn more about investing in private equity, contact your relationship team.

Schedule an appointment with your advisor

Schedule an appointment with your relationship manager

How private equity aligns with Vanguard's vision

Developing an understanding



Investing with Purpose

Frequently asked questions

Private equity is generally only accessible to ultra-high-net-worth investors, either through direct investment or in partnership with a private equity firm, which invests in a private equity fund. A private equity fund invests in companies that aren't listed on a public stock exchange.

Only accredited investors who meet specific qualifications outlined in federal securities laws qualify to invest in private equity funds. Certain private equity funds require investors to meet the definition of "qualified purchaser" in addition to being an accredited investor. This might include institutional investors, such as insurance companies and pension funds, as well as high-income and high-net-worth individuals. The initial investment amount for a private equity fund is often very high.

A private equity investment may be appropriate for investors with a long time horizon who are seeking additional portfolio diversification. Private equity investors are generally comfortable assuming greater risk in exchange for the potential for higher returns over the long term.

U.S. private equity funds are usually structured as limited partnerships. Investors in the funds are limited partners and have to meet certain requirements. The general partner of a fund usually serves as its investment manager.

Although several factors influence a private equity fund's investment returns, the investment manager's skill in creating value through operational, governance, and financial strategies is one of the most important factors in the success of a fund over the long term.

Historically, private equity returns have surpassed public equity returns.* These excess returns "reward" an investor for taking on the risk of making a large, long-term capital commitment and receiving uncertain cash flows. But private equity returns can vary drastically by fund, which is why it's important to choose a reputable private equity firm with skilled fund managers.

Keep in mind, private equity investments are complex and require patience in investing. Investing in private equity requires you to make a long-term commitment of investment capital, and you can experience negative returns in initial years until the fund's underlying investments mature.

The fees for investing in a private equity fund are generally higher and more complex than public equity fee structures. It's important to review the fund's partnership agreement carefully before investing.

When you invest in a private equity fund, you make a capital commitment. Committed capital is money an investor has agreed to contribute to an investment fund. The fund manager generally makes calls for capital from fund investors during the fund's first 1–3 years. If an investor fails to meet a capital call, it may be considered an event of default, which could negatively impact the private equity fund and its returns. During the next several years, you may begin receiving distributions from the fund, consisting of return of capital plus premium. The timing of calls for capital and fund distributions are unpredictable over the lifespan of the fund, which is generally between 12 and 14 years.

Investing in a private equity fund requires a long-term commitment, with no certainty of return. Many private equity funds require capital to be committed for 10 years or more.

There's no public market for interests in private equity funds. Because they aren't registered under federal or state securities laws, they're not transferable unless an exemption applies. If you invest in a private equity fund, your interests in the fund may not be sold, assigned, participated, pledged, or otherwise transferred without the prior written consent of the general partner of a fund.

  • Leveraged buyout transactions. Private equity funds can make growth equity and venture capital investments, which involve a high degree of business and financial risk. These investments can result in substantial losses.**
  • Investments in credit-related transactions. Private equity funds can invest in credit-related transactions involving junior and senior debt investments, which may be unsecured debt that's not backed by collateral.
  • Investments in unstable companies. Private equity funds can invest in securities of highly leveraged companies, financially troubled companies, or companies involved in work-outs, liquidations, reorganizations, recapitalizations, and bankruptcies. While these investments could offer the potential for high returns, they're also associated with greater risk.
  • Use of leverage. Private equity funds may use leverage in their investment strategies, meaning they borrow funds. If these funds earn more money than it costs the firm to use the funds, the private equity fund's investment returns will increase. If the borrowed funds earn less money than it costs the firm to use the funds, the private equity fund's investment returns will decrease.

The income taxation of partnerships and partners is extremely complex.†

Please consult a tax advisor before purchasing a private equity fund.

*See Kaplan and Sensoy (2015) for a survey of past private equity performance literature. Here's an excerpt from the conclusion: "Evidence from new sources of GP-LP [general partner-limited partner] cash flow data, extending through 2011, indicates that BO (buyout) funds have outperformed the S&P 500 net of fees on average by about 20% over the life of the fund. Despite their different data sources, Robinson and Sensoy (2013), Harris et al. (2014), Higson and Stucke (2014), and Phalippou (2013) all find virtually identical average BO PMEs [public market equivalents] using the S&P 500 as the benchmark, suggesting that each of these datasets is reasonably representative of the universe of BO funds. While the evidence overwhelmingly supports BO outperformance relative to the S&P 500, the correct benchmark can be debated." More recent results from Harris, Jenkinson, and Kaplan (2016) show private equity outperformance is still present relative to various alternative public market indexes, in addition to the S&P 500, which was commonly used in early private equity research. Aliaga-Díaz et al. (2020) shows global private equity outperformance through regression-based analysis of approximately 4%, annualized.

**The most significant risks of leveraged buyout transactions are associated with investments in (i) companies in an early stage of development or with little or no operating history, (ii) companies operating at a loss or with substantial fluctuations in operating results from period to period, and (iii) companies with the need for substantial additional capital to support or to achieve a competitive position.

†Tax implications may involve, among other things, significant issues as to the character, timing of realization, and sourcing of gains and losses. Private equity fund investors may be allocated deductions and credits from the fund that they may not be able to claim on their tax returns. Private equity fund investors may be allocated taxable income by a fund that is in excess of the actual cash distributions received during a tax year. Schedule K-1s may not be provided by a private equity fund prior to the time the private equity fund investor's tax return reporting obligations become due, and investors may need to file for extensions. Offshore fund investing structures may be used by U.S. persons investing in private equity to reduce certain tax-filing complexities associated with partnerships but may introduce other risk factors from investing in foreign-domiciled fund structures.

Vanguard has introduced you to HarbourVest in connection with a prospective investment in one or more Vanguard HarbourVest Fund(s) (“VGHV Funds”). In connection with this introduction, please note the following:

  • Although Vanguard is an investor in certain VGHV Funds, Vanguard is providing you information about the VGHV Funds in its role as a promoter of the funds and not as a client of, or investor in, any private fund managed by HarbourVest.
  • The VGHV Funds are the only private equity funds that are made available by Vanguard to its clients.
  • Vanguard will be compensated by its clients in connection with their investments in the VGHV Funds as described below:
    • Vanguard Personal Investor clients, which include self-directed and Vanguard Personal Advisor Wealth Management, will pay Vanguard an annual Vanguard Servicing Fee ("Servicing Fee"), applicable to each VGHV vintage to which they are subscribed, of 0.30% on capital commitments equal to or greater than $500,000 but less than $2 million, 0.20% on capital commitments equal to or greater than $2 million but less than $10 million, or 0.10% on capital commitments equal to or greater than $10 million.
    • In addition to the Servicing Fee noted above, advised clients of Personal Advisor Wealth Management will also be assessed advisory fees on their investments in the VGHV Funds that are included as part of their advised portfolio in Personal Advisor Wealth Management.
    • Advised clients of Vanguard Institutional Advisory Services ("VIAS") will be assessed advisory fees on their investments in the VGHV Funds that are included as part of their advised portfolio in VIAS.

Consequently, Vanguard has a financial incentive to make available to self-directed clients and recommend to advised clients the VGHV Funds.

All investing is subject to risk, including the possible loss of the money you invest.

Diversification does not ensure a profit or protect against a loss.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any specific investment product sponsored by, or investment services provided by The Vanguard Group, Inc., Vanguard Advisers Inc., Vanguard Marketing Corporation, Vanguard National Trust Company or their affiliates.

Private investments involve a high degree of risk and, therefore, should be undertaken only by prospective investors capable of evaluating and bearing the risks such an investment represents. Investors in private equity generally must meet certain minimum financial qualifications that may make it unsuitable for specific market participants.

HarbourVest Partners, LLC is a registered investment adviser under the Investment Advisers Act of 1940. This communication is for informational purposes only and does not constitute an offer or solicitation to purchase any investment solutions or a recommendation to buy or sell a security nor is it to be construed as legal, tax or investment advice. Unless otherwise indicated, any information available through this communication is as of the date indicated therein and may not be updated or otherwise revised to reflect information that subsequently becomes available. HarbourVest is under no obligation to update the information contained in this communication.

Additionally, the information in this communication does not constitute a representation that the solutions described therein are suitable or appropriate for any person, and HarbourVest does not accept any liability with respect to the information.

For qualified purchaser and accredited investor use only.