Private equity is the next big thing coming for you. This is nothing new. This is the Holy Grail for the big firms like BlackRock in PE. Offering it in 401(k)s, IRAs, and the like is a money gathering machine.
Your Survival Guy has some concerns. Shocker, right? This isn’t about you making money. It’s about the big guys making money off you. Same song, different beat.
You know from here, here, and here how the push by investment firms to ESG was not about the environment per se but about charging higher fees. With index funds basically free, the big firms need revenue streams. Hence, the push for private equity for you.
And the private equity game is too good to pass up, with much higher fees and locking up money from individual investors for a long time. And you thought it was your money?
In a sign that the “times they are a-changin’,” Blackstone is partnering with Vanguard and Wellington to help create more products and services. In other words, private equity for mom and pop.
The problem, of course, is that the low hanging fruit has already been picked by institutional investors like pensions and endowments. They need a way to get out, and unfortunately, they would if they could, but prices are so far down from when they bought they can’t sell profitably. Hence, the individuals with 401(k)s and such to the rescue. Miriam Gottfried reports in The Wall Street Journal:
The tie-up represents Wall Street’s latest push to get investments such as private equity and private credit into the hands of individuals. While the trio’s initial products will be sold via financial advisers, the collaboration is expected to be long-term and could evolve.
The partnership could give Blackstone a path to offer private-markets assets for target-date funds in 401(k)s, which many in the industry have long viewed as a holy grail.
Vanguard is a major player in that market with $2.5 trillion in retirement assets as of the end of 2024.
And this from another WSJ article about nervous PE’s looking for an exit:
Anxiety among managers is running high as the forces that powered the industry’s growth fade. Institutional investors have maxed out on private equity, and higher interest rates are making it harder to raise money and profitably sell companies that were purchased when rates were lower. Firms are now fretting over whether to branch out into new business lines, sell themselves or be an acquirer, go public or court individual investors.
Action Line: There may be opportunities in PE, but as far as this first salvo goes, make sure you know what you’re being sold. The full court press is coming. When you want help, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter. My most recent letter talks about bonds, when to buy and sell, and gold miners.
