00:00Nick, thank you so much for speaking with us.
00:01Just outline for us what each of the three firms bring to this partnership and to these two funds.
00:06What are your distinct contributions?
00:08Yeah, thank you. Thank you for having me.
00:09So three firms came together to solve ultimately two issues,
00:13and that's why it comes to what they're contributing.
00:14On the one side, we saw this huge convergence going on between public and private,
00:19and if we look at what's going on with big institutional clients,
00:22they're investing across public, private, active, and passive all-in-one integrated fund.
00:26But the second challenge is it's quite complex to do that.
00:30From an investment and operational side,
00:31the three firms came together to try and build solutions that say,
00:35well, let's build integrated solutions that are administratively easy to use.
00:39From that, from the Blackstone perspective, they're bringing their deep private expertise.
00:44From Vanguard, active core fixed income and index.
00:47And from Wellington, two things, our active equity and our institutional caliber portfolio construction capability.
00:53All right, and the one we kind of focus on here is the WVB All Markets Fund,
00:57which is a mixture of all that.
00:59Let's say I have a portfolio.
01:01I'm a 60-40 investor worth a little spice.
01:03What am I selling to buy this?
01:05So with that, these funds are through a financial advisor.
01:09The first thing I'd say is the 60-40 is important.
01:12The WVB All Markets is, at its heart, looks like and feels like a 60-40.
01:17That's the construct.
01:17So what you could do is put it as part of the core of that portfolio in discussion with your
01:22financial advisor,
01:23if that makes sense.
01:24In terms of what it's trying to do is provide a more diversified asset class exposure than a 60-40,
01:30so it can fit quite nicely into that.
01:31What kind of demand have you seen from Wellington clients for a product like this?
01:35So we've just finished a trip around the U.S., and we've seen enormous demand to discuss this from financial
01:41advisors.
01:42I think it really does resonate in terms of solving some of those issues, at least addressing some of the
01:46challenges they have.
01:47So we looked at the ARK Venture Fund a lot this year.
01:50That's full.
01:50It's all privates, and you have one that's all privates.
01:52It has all the hot private companies, right?
01:55OpenAI, Neuralink, like anything you can imagine.
01:57But it didn't really sell that much because you can't go on a Schwab account and just buy it with
02:01your brokerage account.
02:03Is there any chance that these interval funds, which many say are the right wrapper for privates versus an ETF,
02:09could be moved into the brokerage area where I can just buy them without the advisor?
02:13I think in time we could look at that.
02:16At the moment, they're through a financial advisor, and they're designed to be bought through advice on that side.
02:23Let me ask you also about this idea of Anthropic, OpenAI.
02:28These companies wait so long to go public.
02:31And so investors, even retail investors who aren't even that hooked into news, they're on to this.
02:38They want exposure to some of these hot shot pre-IPO companies.
02:42Is that one of the impetuses to do this, is to satiate that need?
02:46Because there's more private companies now that aren't IPO-ing.
02:51Is that part of why you guys did this?
02:53So I think you've hit on something there.
02:55Part of what's going on in the broader economy is that many companies are staying private for longer.
02:59So if you want to invest in many of those growing parts of the economy, often going private is the
03:04route you have to go.
03:05What we're trying to do with both of these funds is provide access to all of that.
03:08So yes, part of this whole alliance is about bringing access to all of these investment opportunities.
03:14That includes private equity as well as private credit, right?
03:17And private infrastructure and private real estate.
03:19What's been the fallout from private credit?
03:22Because there's been a lot of concern that they're entering a cycle where defaults could start increasing.
03:28And I wonder how that plays into people's willingness to buy private assets.
03:33Are they shying away from it or are they doubling down because of the exposure to these pre-IPO companies?
03:37So I'd say a few things there.
03:38One is there's a difference between private credit and private equity and all the others.
03:42And what we're trying to do here is have a diversified exposure across all of those.
03:46The other thing I'd say is that if you take a long-term portfolio construction view, private credit can play
03:51a fantastic role in the portfolio.
03:53It provides an income on that side.
03:55In terms of the short term, both of these funds have an allocation to private credit, but they're total return
04:02orientated.
04:03And therefore, it's more towards the other asset classes.
04:05So let's look at the fees here.
04:06It's an interesting breakdown.
04:08The management fee is 10 bps.
04:09It's very Vanguardian of you.
04:11But the net fee is 1.14% and the gross is 3.4%.
04:16So I'm guessing the 1.14% is what you pay.
04:19That's the fee here.
04:20How does that work?
04:21Like, where's the extra coming from, from the 10-bit managed fee?
04:24Like, how does the fee get compiled?
04:26So Full Prospectus has all the fee breakdown on that side.
04:31What's going on there is that there is fees being applied at the top level, but then also on the
04:36underlying, different underlying building blocks.
04:38Obviously, anything that has private assets in it requires a long-term focus.
04:41When you talk to investors and you educate them on that, what kind of long-term focus are you telling
04:46them they should be preparing for?
04:48So through the cycle on that side, so these should not be ones that you hold and you want to
04:53sell tomorrow.
04:54These are about building a long-term portfolio.
04:57In terms of time horizon, we're often thinking three years plus in terms of how we build the portfolio.
05:02When you're speaking to an advisor, it's more what's the long-term ambition of that particular investor and does this
05:06line up with that?
05:08I just have to bring this up because I spent, like, two years researching for a different book, Jack Bogle
05:13and Vanguard.
05:14In every single one of his books, he talks about the Wellington Fund.
05:17That's a different fund than this.
05:18That fund is 100 years old.
05:20There were 12 funds launched in the 1920s.
05:23Six of them are gone.
05:25Six survived.
05:26But the Wellington has 90% of the assets of those six.
05:30Six, what does that fund mean to Wellington and is it a fund that's, like, still vibrant or is it
05:38maybe more of a relic now?
05:40And, you know, I guess I want to talk about that history a little bit.
05:43So I think the success you've gone through talks to us over time delivering on the objectives of that fund.
05:48So that's the key thing there.
05:50And I think that fund itself brings together some fantastic capabilities and continues to attract lots of interest.
05:56What we're doing with the alliance here is saying, well, there are different investors want different things.
06:01And for that, we've built up the WBV portfolios.
06:04And you guys are just coming into the ETF market?
06:07Are you excited about that?
06:09ETFs are an important access point for many clients.
06:12And, yes, we are.
06:13I think you should do this in ETF format, which is, to me, you make this.
06:18The Wellington fund, you mean?
06:19Yeah, we'll call this an album.
06:20I just feel like interval funds are a little bit like a compact disc or vinyl.
06:23And then the ETF is, like, digital.
06:25So because they put even a little private in an ETF and, like, it takes in billions of money, billions
06:31of dollars.
06:32That's my one suggestion.
06:34So I hear you.
06:35The challenge is matching the wrapper to the underlying liquidity on that side.
06:40So I don't think that would happen.
06:41I do think we need to be careful of matching the liquidity.
06:43But I hear you in terms of the access on ETFs.
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