One of Private Equity’s Most Reliable Customers Is In Danger — So They’re Turning Their Attention to You

Private equity firms like Blackstone, Apollo, and KKR have long relied on governments, pensions, and universities to raise capital. But as President Donald Trump takes aim at elite universities, some of the world’s largest asset managers are reading the room — it’s time to find new customers.

Private equity goes public: To ride out frozen federal funding and shore up cash before proposed hikes in endowment taxes, elite universities are dipping into their multi-billion-dollar endowments and selling off private equity stakes. It could be the start of a broader wave of secondaries from institutions — which might individually be insignificant, but collectively, a potential drag on private equity fundraising. The situation is already sub-optimal for these giants, and while hardly existential, they’re eying new sources of growth.

• In April, we wrote about how private equity firms have been cozying up to offer their products in retirement portfolios — and now it’s happening. 401(k) providers like Vanguard and Empower have confirmed they’re adding these products.
• At the same time, some are taking products directly to the retail crowd: a new private credit ETF, a ‘tokenized’ infrastructure fund from Republic and Hamilton Lane, and the nod for new private funds by KKR and Capital Group are among the cropping.

So What Could Go Wrong?

Matters could reach a fever pitch as the SEC dropped its 15% limit on private fund holdings for closed-end funds, and the White House is reportedly considering an executive order that could accelerate the adoption of private equity in US retirement plans. A recent Apex Group report says retail investors view private equity as a “safer” haven — but buyer beware: this could be the wild west.

• Although private equity has a strong track record of success, it remains to be seen whether it can maintain those returns while tapping trillions of dollars in new funding.
• Further, private assets in 401(k)s or individual portfolios could be a black box, with limited insights on fees, portfolio success, and other key metrics.

The worst-case scenario: Thoma Bravo co-founder Orlando Bravo cautions that private equity will simply shift losing assets to retail using continuation vehicles — whereby firms buy companies from themselves, leaving individuals stuck with “companies that people cannot sell.” To that end, the retail crowd — generally lower info and lower engagement than wealthy institutional investors — could be left holding the bag. So, despite the promise of the so-called 50/30/20 portfolio, many investors might want to stick to what they know.