Private Markets Pivot to Retail Investors and Europe Amid U.S. Policy Uncertainty | Weekly Pulse

🚨 MUST KNOW: Private Credit Expands to Retail Investors Amid Market Volatility

Bottom Line: Private credit continues to expand rapidly beyond institutional investors to reach retail and 401(k) markets, despite growing concerns about industry risks in the $2.2 trillion asset class.

Why It Matters:

• 📈 Private credit market projected to double to $3 trillion over the next three years, according to Moody's Ratings

• 💼 Wall Street firms including Apollo, Blackstone, and KKR aggressively targeting the $12.4 trillion 401(k) market

• 🏦 Asset managers have raised nearly $300 billion from private individuals for private credit, according to PitchBook

• 💰 Empower, the nation's second-largest 401(k) provider, announced partnerships with seven firms to offer private markets in retirement portfolios

• 🔍 Sentiment among the "Big 4" private equity firms (Apollo, Blackstone, Carlyle, KKR) dropped to lowest level in over a year amid tariff concerns

Big Picture:

• Private credit is transforming who lends money in the global economy and where capital comes from. As borrowers seek safer options amid chaos from Trump administration trade policies, firms are rapidly expanding their reach to retail investors.

• The volatility has created what Ares CEO Mike Arougheti called a potential "golden opportunity" to "deploy larger and larger dollars."

• However, warning signs are emerging - the IMF reported almost half of borrowers from direct lenders had negative free operating cash flow even before Trump's tariff announcements, and restructuring experts report that around 80% of their current situations involve private credit.

• With "evergreen" funds now comprising approximately $300 billion of the industry, questions are growing about potential liquidity risks and systemic impacts in a downturn.

🌎 MARKET SPOTLIGHT: REGIONAL DEVELOPMENTS

• 🇺🇸 United States: Private equity giants looking beyond U.S. for opportunities as policy uncertainty roils domestic market, according to WSJ Pro analysis of recent earnings calls

• 🇪🇺 Europe: Increasingly viewed as investment destination of choice for private credit and PE firms seeking to escape U.S. policy turbulence, with KKR strategists noting the continent is going through a "potentially pivotal moment"

• 🇮🇳 India: Private credit market heating up with Shapoorji Pallonji Group signing a record $3.4 billion deal with around a dozen investors including Ares, Cerberus, and Deutsche Bank at 19.75% annual yield

• 🇸🇬 Singapore: Education sector becoming a hotbed for private credit in Asia, with XCL Education securing a $400 million loan from Apollo, Partners Group, Deutsche Bank and Nomura

• 🇬🇧 UK: Pension providers rapidly evolving their defined contribution default private market allocations ahead of Mansion House Compact II announcement, with many targeting 10-15% allocations by 2030

• 🇨🇦 Canada: Northleaf Capital Partners raises $2.6 billion infrastructure fund with strategy of backing businesses focused on a single country to help mitigate tariff effects

• 🇦🇪 UAE: Fortress Investment Group and Kimmeridge opening Abu Dhabi offices to pursue deals by leveraging ties to Mubadala Investment Co., which recently formed a $1 billion partnership with Fortress

• 🇦🇺 Australia: Being targeted as a key market by Hillhouse's Elham Credit Partners' new private credit fund, along with India and Japan

💼 DEAL SPOTLIGHT: TRANSACTIONS & STRATEGIES

• 🔄 Private Credit Secondaries: TPG Twin Brook Capital Partners setting up a $3 billion continuation fund deal - the largest ever in private debt market - allowing investors to cash out of several older funds or roll their stakes into a new vehicle

• 🏫 Education Financing: TPG-backed XCL Education secured a $400 million private credit loan from Apollo, Partners Group, Deutsche Bank and Nomura to refinance existing debt with a five-year tenor

• 🏗️ Infrastructure Investment: Northleaf Capital deploys portion of new $2.6 billion fund into wireless communications towers shared by Canadian phone companies, with strategy focused on single-country businesses to mitigate tariff impacts

• 💰 Fund-Level Transaction: Blackstone worked with JPMorgan Chase on the sale of JPMorgan Private Markets Fund, which has reached $1 billion in assets with a diverse portfolio of secondary and co-investment opportunities

• 🏢 Real Estate Secondaries: Blackstone acquired a portfolio of investments managed by Brynwood Partners' eighth flagship vehicle for JPMorgan's Private Markets Fund at "an attractive price"

• 🚿 Private Equity Dividend Recapitalization: Clayton Dubilier & Rice-backed Wolseley Group offering £350 million senior secured bond to finance a distribution to shareholders and refinance existing debt

• ⚡ Power Equipment Dividend: Aggreko offered $2.265 billion of debt, with $503 million earmarked for dividend distributions to owners TDR Capital and I Squared Capital

• 🧪 Chemical Industry Dividend: Currenta Group sold €1 billion in bonds with €186 million designated for distribution to owner Macquarie Group

• 💊 Pharma Dividend: Czech pharma company Zentiva priced a €600 million term loan partly to fund a distribution to shareholder Advent International

• 🏀 Sports Investment: Mark Cuban, Steve Cannon, and Rashaun Williams launching $750 million Harbinger Sports Partners Fund to take small stakes (up to 5%) in US pro sports teams, targeting NBA, NFL, and MLB

• 📊 Exchange Divestment: Thoma Bravo sold its remaining stake in Nasdaq Inc. for $3.4 billion, completing a profitable investment that generated approximately $1.4 billion in profit from its original stake

🏦 FUNDRAISING FOCUS: CAPITAL FORMATION

• 🏢 PE Flagship Fundraising: TPG sets $13 billion target for TPG Partners X flagship buyout fund, down from $14-15 billion target for its predecessor, reflecting tough fundraising environment since 2022

• 🌏 Asian Expansion: Hillhouse's private credit arm, Elham Credit Partners, securing $700-750 million in anchor commitments for its inaugural private credit fund, potentially reaching $900 million to $1.1 billion total

• 🏗️ Infrastructure Allocation: Northleaf Capital Partners raises $2.6 billion, above its $2.25 billion goal, for infrastructure investments in transportation, renewable energy and telecommunications

• 🍕 Consumer Sector: VMG, a San Francisco private-markets investor, collects $1 billion for high-growth investments in consumer brands such as Kind energy bars and Spindrift sparkling water

• 🇩🇪 Wealth Management: Deutsche Bank struck a deal with Coller Capital to sell one of its main funds with net assets exceeding $800 million to wealthy European and Asian clients, with minimum commitment of €50,000

• 🇮🇳 Indian Growth: Kotak Alternate Asset Managers planning a $2 billion fund to capitalize on growing private credit opportunities in India

• 🏢 Infrastructure Focus: General Atlantic's Actis raising a $1.7 billion fund dedicated to infrastructure in emerging markets

• 🌍 African Development: BluePeak Private Capital on track to raise $250 million for its African private credit fund to invest in mid-sized companies across the continent

• 🇪🇺 European Credit: Metric Capital Partners closed its fifth fund after meeting its €1 billion target for European private credit investments

• 🇬🇧 Corporate Credit: Avendus Structured Credit Fund III completed its first close, raising over 10 billion rupees in commitments

• 🏆 Sports Investment: New Harbinger Sports Partners Fund launching with $750 million to invest in US professional sports teams, with plans to target $50-150 million investments per transaction

• 🇸🇬 Singapore Growth: Granite Asia secured over $250 million for the first close of its private credit strategy

🧠 INDUSTRY INSIGHTS: STRATEGY & OUTLOOK

• 🧩 Retail Investor Expansion: "A lot of private asset managers see tremendous opportunity there. And we believe there are tremendous opportunities for retirement investors in private investing," said Ed Murphy, CEO of Empower

• 📱 Private Credit Differentiation: "For credit investors, in order to get alpha, you have to have an edge, whether it's through your sourcing or the area of the market that you play in," said Ken Kencel, CEO of Churchill Asset Management

• ⚙️ 401(k) Evolution: "Private real estate provides income and inflation protection," said Jenny Johnson, CEO of Franklin Templeton, explaining the benefits of including private markets in retirement portfolios

• 🏦 Scale vs. Specialization Debate: "There is the question of whether the private credit market has outgrown certain managers," according to Jonathan Bock, senior managing director and co-CEO of Blackstone's BCRED private credit fund

• 🔄 Performance Dispersion: "We are going to see a massive dispersion in the performance of private credit managers, and what they bought over the last couple of years," warned TCW Group CEO Katie Koch

• 💼 Monetizing Private Assets: "Private equity firms need to monetize their assets. In many cases equity multiples are lower than when they acquired businesses, so a dividend recap is the best option to show you created some value," explained Nicolas Jullien, head of fixed income at Candriam

• 📉 PE Fundraising Realities: "We still expect each fund to grow compared to its predecessor, but in aggregate, they may not grow as much as we previously expected," TPG CFO Jack Weingart told investors, explaining reduced targets

• 🔮 Market Opportunity: "In our experience, times like this yield some very attractive investment opportunities," KKR Co-CEO Scott Nuttall said, describing the firm's approach to macroeconomic uncertainty

• 💰 Private Credit Risks: "More volatile markets do mean we are less likely to sell in the near term, although that can change if conditions improve," noted Blackstone CEO Stephen Schwarzman on the complex exit picture

• 📊 Evergreen Growth: "Advocates for private credit like to tout a key advantage over banks: locked-up money," writes Reuters Breakingviews analyst Neil Unmack, while cautioning about risks in the fast-growing $300 billion "evergreen" segment

• 🔒 Retail Private Credit Safety: "People should not invest in things they don't understand," warned Alicia Munnell, an economist who ran the Center for Retirement Research at Boston College, regarding private credit risks

• 🌱 401(k) Market Expansion: "Empower is making a profound move on behalf of American retirement investors who should have the ability to invest in an asset class that has the potential to diversify their portfolios and offer opportunities for returns in new ways," said Empower CEO Edmund Murphy

🔮 TRENDS TO WATCH

• 🚪 Private Credit in Retirement Accounts: 🔄 The $12.4 trillion 401(k) market becoming primary target for asset managers, with Empower enlisting Apollo, Franklin Templeton, Partners Group and others to offer private investments in retirement portfolios

• 📊 Evergreen Structures Dominating: 💵 Private credit firms have raised nearly $300 billion from private individuals through "evergreen" vehicles offering limited quarterly liquidity, potentially creating new risks in market downturns

• 🔍 Pension Provider Evolution: 📋 UK pension providers rapidly enhancing DC default private market allocations with many targeting 10-15% by 2030, ahead of expected Mansion House Compact II announcement

• 🌎 Geographic Shift to Europe: 🗺️ Private equity leaders increasingly looking abroad, particularly to Europe, as U.S. policy uncertainty roils domestic markets, according to KKR strategists

• 🎓 Education Sector Financing: 📚 The education sector becoming a hotbed for private credit, with recent deals including XCL Education, The Learning Lab, and Canadian International School

• 🔄 Bank vs. Private Credit Competition: 💵 Heightened competition between private lenders and banks fueling surge in borrowers refinancing debt across markets, with $10.4 billion of deals originated by direct lenders being refinanced in the syndicated-loan market year-to-date

• 🧩 Dividend Recapitalizations Surging: 💰 Private equity firms increasingly launching debt deals to pay dividends to owners as they face pressure to return money to clients, though this strategy raises leverage concerns

• 🎯 Reduced Fundraising Targets: 📉 Private equity firms scaling back fundraising targets to reflect tougher market conditions, as seen with TPG lowering its flagship fund target to $13 billion

• 🏥 Healthcare Sector Focus: 💉 Healthcare companies like Alera Group turning to both traditional banks and private credit, with growing competition for financing deals

• 🌏 Asia-Pacific Expansion: 🌐 More firms boosting presence in APAC private credit market, with Singapore and Hong Kong emerging as key hubs

• 🏦 M&A in Asset Management: 🤝 Consolidation accelerating with firms like Man Group in talks to acquire credit firm Bardin Hill Investment Partners to expand private credit capabilities

• 🏅 Sports Team Investments: 🏀 Private equity increasingly targeting professional sports franchises, with valuations booming and the NFL recently allowing institutional money

• 🔃 Secondary Markets Growth: 🔄 Private credit continuation funds gaining traction, with TPG Twin Brook Capital Partners setting up $3 billion deal to let investors cash out of older funds

• ⚙️ Infrastructure Allocation Focus: 🏗️ Shift toward infrastructure strategies that minimize tariff impacts, with Northleaf Capital raising $2.6 billion for investments in relatively tariff-insulated sectors

📊 BY THE NUMBERS

• $2.2 trillion 🌍 Size of the global private credit market, with firms looking to expand offerings as demand rises from borrowers

• $3 trillion 📈 Projected size of private credit industry in next three years, according to Moody's Ratings

• $300 billion 👨‍👩‍👧‍👦 Amount raised from private individuals for private credit through "evergreen" vehicles

• $20 trillion 📊 Estimated assets under management in private markets by 2029, according to Standard Chartered

• $750 million 🏆 Size of new private equity fund Harbinger Sports Partners launched by Mark Cuban and partners

• 5% 📉 Maximum quarterly redemption limit for most retail-focused "evergreen" private credit funds

• 10% 🏢 Target allocation to private markets in State Street's target-date 401(k) fund managed by Apollo

• 10-15% 📋 Expected allocation to private assets in UK defined contribution pension portfolios by 2030

• $1.17 trillion 💼 Blackstone's AUM in Q1 2025, up 4.6% from previous quarter