Vanguard makes a bold bet against public markets

Vanguard built its reputation on a simple promise: low-cost index funds would beat most active managers over time. That philosophy turned the Pennsylvania firm into one of the largest asset managers on the planet, overseeing trillions of dollars in passive strategies that track public stock and bond markets.

Now the firm is telling investors that public markets alone may not be enough. In a research outlook published in February, Vanguard projects that carefully selected private equity funds will deliver stronger returns than publicly traded stocks over the coming ten years.

The question is whether the added complexity, illiquidity, and cost that come with private equity are worth it for the typical long-term investor.

Vanguard forecasts high-single-digit returns from top private equity funds

The firm’s investment strategy team projects that well-managed private equity funds charging reasonable fees will produce high-single-digit annualized gains over the next decade, surpassing what public equity portfolios are expected to deliver. 

That forecast rests on Vanguard’s Capital Markets Model, which runs thousands of simulations to estimate return distributions for major asset classes, according to Vanguard’s outlook report.

Private equity fund performance varies wildly depending on who manages the money. Vanguard’s own data show that the gap between top- and bottom-performing PE funds is far wider than that between top- and bottom-performing public stock funds. 

Buyout funds in the top quartile have historically generated meaningful excess returns above public benchmarks, while those in the bottom quartile have destroyed value, Vanguard researchers found, citing academic work by Brown and others published in 2024.

Unlike public index funds, where the performance gap between providers is measured in fractions of a percentage point, private equity can swing outcomes by double digits depending on the fund manager’s skill and discipline.

Vanguard’s push into private markets marks a strategic departure

Vanguard first ventured into private equity in 2020 through a partnership with HarbourVest Partners, a Boston-based firm specializing in private market strategies. 

That initial offering targeted institutional clients such as pension funds and endowments before expanding to qualified individual investors with at least $5 million in investments, according to Vanguard. The firm took an even larger step in May 2025 when it joined forces with Blackstone and Wellington Management to file the WVB All Markets Fund with the SEC. 

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That interval fund is designed to allocate up to 40% of its assets to private markets, including private equity, private credit, real estate, and infrastructure, with the remainder allocated to public stocks and bonds. The minimum investment sits at just $2,500, a fraction of the typical PE entry point, according to the fund’s SEC filing.

For Vanguard, the move reflects a broader industry trend. Asset managers across the spectrum are racing to bring private market exposure to retail investors through new fund structures. The firm that Jack Bogle built on the idea that you shouldn’t try to beat the market is now telling clients that some managers can do exactly that, if you pick the right ones.

Private company valuations still offer an edge over public stocks

One of the pillars of Vanguard’s bullish forecast is the valuation gap between private and public companies. The median enterprise value-to-EBITDA multiple for U.S. private equity buyouts is 18.8 times earnings, while the global equivalent is 14.8 times. 

Both figures compare favorably against the S&P 500, which trades at roughly 10.9 times on the same measure, according to Preqin and PitchBook data cited in Vanguard’s report. While all three figures remain elevated by historical standards, Vanguard argues that the spread still supports a meaningful liquidity risk premium for investors willing to lock up their capital for years at a time. 

Vanguard expects U.S. corporate earnings to grow at roughly 5% per year over the next decade, with global earnings trailing slightly at around 4%, according to Vanguard’s 2026 economic and market outlook.

Private equity faces real headwinds that could limit returns

Private equity managers are operating in a difficult environment marked by higher borrowing costs, a backlog of unsold portfolio companies, and slowing fundraising. 

Industry-wide deal value reached $904 billion in 2025, a 44% jump from the prior year, driven largely by mega-transactions, but the number of individual deals actually fell 6%, according to Bain & Company’s 2026 Global Private Equity Report.

Fundraising has also dropped sharply, as Global PE capital raising fell more than 30% from its 2023 peak as limited partners received fewer distributions and became more selective about which managers they backed, according to S&P Global/With Intelligence. For the average investor, that means picking the wrong fund manager could easily wipe out any theoretical premium over a low-cost S&P 500 index fund.

Despite decades of fee compression across public mutual funds and ETFs, private equity management fees have remained stubbornly high, Vanguard acknowledged in the report, citing Callan research published in 2024. The firm argues that investors who partner with organizations able to negotiate lower fees will see better net returns, meaningfully, according to Vanguard.

What Vanguard’s private equity push means for your portfolio

If Vanguard’s projections hold, the implications for long-term investors are significant. A well-constructed portfolio that blends low-cost index funds with carefully chosen private equity exposure could generate higher risk-adjusted returns than one limited to publicly traded assets alone.

That does not mean you should rush to overhaul your investment strategy. Private equity locks up capital for years, and quarterly redemption windows in interval funds like the WVB All Markets Fund still represent far less liquidity than a standard index ETF. 

“Private assets are becoming more and more acceptable and more and more in demand,” said Marc Rowan, Chief Executive Officer, Apollo Global Management Inc.

Vanguard itself notes that the volatility of private equity returns is broadly comparable to that of public stocks when measured properly, rather than relying on the artificially smooth quarterly net asset values that many PE funds report.

Investors considering this space should think carefully about their time horizon, liquidity needs, and tolerance for opacity. Many of the new public-private blended products remain untested, and even the partnerships behind them are still in their early stages, Morningstar noted.

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 BlackRock to 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.

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