Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Partners Group is overhauling a flagship private equity fund months after it capped redemptions and is considering doing the same on its other vehicles as investors clamour to withdraw cash.
The Swiss firm plans to split the holdings in its €6.6bn European fund for wealthy individuals into a portfolio of older, worse-performing assets and a separate pool of newer investments that it hopes will deliver higher returns, according to a statement by the group and a person familiar with the matter.
The move follows pressure on the Zug-headquartered firm from clients pushing to withdraw their investments from its leading US and European funds for wealthy individuals after a period of weak performance.
Partners Group pioneered the sale of private equity and other private markets products to wealthy individuals but has in recent years been hit by aggressive competition from much larger US groups such as Blackstone and KKR.
The firm said it planned to turn the €6.6bn European fund into an umbrella vehicle overseeing two portfolios. One would be labelled a “distributing” portfolio, while the other would be “compounding”, it said.
Partners Group was considering doing the same on its other older evergreen strategies for wealthy clients, said a person familiar with the matter.
The “distributing” portfolio would contain the fund’s older investments, which were performing worse than its newer holdings, according to the person familiar with the matter.
Existing investors would have roughly 75 per cent of their exposure allocated to the distributing fund and 25 per cent to the compounding fund, the person said, reflecting the ratio of older and newer holdings in the vehicle.
The firm capped quarterly withdrawals at 5 per cent of the fund’s value in June. The fund is still gated, meaning outstanding redemption requests have exceeded that level.
Investment funds typically impose redemption limits to avoid being forced into a fire sale of assets at reduced prices which could damage the fund’s overall performance.
The activation of the cap by Partners Group came as the private equity industry struggles to sell older investments, many of which were made at high valuations in a low interest rate environment and on which they now risk being unable to make a good return if they sell.
The overall cap on redemptions would remain at 5 per cent, with the same limit imposed on each of the new sub-portfolios.
Over time, investors would have the option of reallocating cash generated by the sale of assets in the “distributing” fund into the “compounding” fund, the person said, adding that they would not be able to switch their existing shares from one pocket to the other.
The plans are subject to shareholder approval.
