The sound of fund gates slamming shut is never welcome. But when it comes to private equity, investors should be less surprised than with real estate or private credit. Still, Wednesday’s news that Partners Group Holdings AG has capped withdrawals from a $8.6 billion vehicle aimed at rich people is troubling for an industry that has put the wealth market at the center of its growth plans.
Private equity has struggled to satisfy investors for years now because managers are finding it hard to sell portfolio companies for decent returns and hand cash back. Sentiment and fund raising have suffered; growing withdrawal demands from individual customers won’t help. But this is less of a problem than in private credit because these redeemable funds make up an even tinier portion of total assets in private equity. Most investors in the sector are big institutions that have willingly locked their money up for years,
Partners Group is a bit of an outlier. The Swiss private asset manager has long targeted the rich clients of private banks and is more dependent on them than many rivals, with almost 20% of its money from that source. It first launched these kinds of permanent private equity funds for the wealthy with redemption windows roughly 20 years ago.
However, the signal sent by its restriction of withdrawals from its Global Value SICAV evergreen fund weighed on the stock prices of listed peers as well as on Partners Group itself. Partners declined more than 17% on Wednesday, while EQT AB and CVC Capital Partners Plc both slipped more than 6%.
The gated fund had requests for nearly 10% of net assets to be redeemed, but has an automatic stop at 5%. The fund has plenty of spare cash to hand and could easily have met a higher level of redemptions, but Partners’ Chief Executive Officer David Layton said its mandate was to keep investing in deals and needed money available for that. Investors who really want their money will join a queue to get it back in future quarters. “Some of the redemption pressure that started in private credit has started to make its way over into other asset classes,” Layton told Bloomberg TV on Wednesday.