Partners Group prepares for investor restrictions amid fears in private markets

Group of Partners is willing to limit investor withdrawals from some of its funds, the Swiss private markets giant said on Thursday, after recording a bailout of one of its European vehicles following a surge in exit requests.

A Zurich-listed fund manager has warned that the surge in customer withdrawals that have buoyed private debt markets this year now appears to be feeding into the private sector.

On Wednesday, Partners Group said it was suspending withdrawals from its Global Value SICAV vehicle at 5%, after redemption requests reached 9.8%.

It warned that one of its funds – a US private car controlled by Delaware – would also face redemption requests of around 6% of total assets in the second quarter. The other three hedge funds, with combined assets of $9.7 billion, are also likely to experience second-quarter returns of 3.5%-5%, Partners Group said.

In a statement, Partners Group acknowledged the high volatility of all open-ended funds called “evergreen”, adding that it will impose 5% liquidity limits on those vehicles if withdrawal requests exceed that limit.

The rush for investor outflows is raising concerns about pressure on the global private markets industry.

“Liquidity features are designed to protect long-term investors, and to ensure that returns continue to be driven by the quality of the underlying private assets rather than the volatility of short-term flows,” said CEO David Layton.

He said that Partners Group’s portfolio companies offer “tremendous potential,” adding that, since inception, its capital funds have returned more than five times their investment to clients.

Partners Group said about 80% of its assets of less than $185 billion come from long-term institutional investors, and 20% from wealthy investors.

Shares in Zurich-listed Partners Group fell more than 16% on Wednesday, while shares in the US private market, incl. KKR, Blackstone again Aresand finish lower on Wednesday.

Partners Group was trading 3.6% higher in morning trading on Thursday.

Tony Dalwood, CEO of Gresham House, told CNBC’s “Europe Early Edition” that the development of Partner Groups highlights the importance of matching investors with funds whose underlying assets have the right income profiles and duration.

Retail and wealth clients typically invest for shorter periods than institutional investors, such as pension funds and insurance companies.

“The private markets should be for people with long-term ambitions and investments and should be aligned accordingly,” Dalwood said.

He said the so-called “democratization” of private markets, which has seen a big push by private asset managers to enter the retail wealth sector, requires better education of investors about income limits during times of market stress.

Dalwood added that about 3% of private ownership is in evergreen vehicles, but that is likely to grow in the coming years.