Private Markets Shift to Retail as Institutional Flows Slow While Managing Risk Concerns | Weekly Pulse

🚨 Must Know: Private Markets Pivot to Retail Amid Rising Leverage and Risk Concerns

💡 Bottom Line: Private credit firms are offering higher leverage ratios as a competitive sweetener to win deals, with some companies reaching leverage over six times earnings as lenders compete with the broadly syndicated market.

📈 Why It Matters: Private lenders are providing around $3 billion of financing for Flexera Software to pay a dividend to its private equity owner Thoma Bravo, adding almost $1 billion to its current $1.9 billion capital structure. Around 45% of companies financed by private debt are in danger of breaching their leverage cap, marking a three-fold increase compared to buyout vintages from 2010 to 2019.

🌍 Big Picture: Finding steep competition from the broadly syndicated market, direct lenders are pulling available levers to entice borrowers, offering delayed draw term loans and accepting heavily adjusted earnings metrics while loan-to-value ratios remain around 30% to 40%, making lenders more comfortable pushing leverage boundaries.

🧠 Industry Insights: Strategy & Outlook

• 🎯 Private Credit Evolution: Apollo CEO Mark Rowan predicts financial advisors will become a key frontier for selling private markets to retail clients, expecting Trump administration to relax regulations for 401k access

  
  

• 📈 Leverage Concerns: Private credit firms are offering higher leverage ratios to compete, with some deals pushing leverage over six times earnings according to industry sources

  
  

• 🔄 Secondary Market Growth: Sponsor-led transactions accounted for 44% of the $160 billion secondary transaction volume last year, driving new entrants into the market

  
  

• 🏦 Insurance Partnership Trend: As much as a third of $6 trillion in US life insurer assets was allocated to private credit at end of 2024, with this figure rapidly rising

  
  

• ⚖️ Pension Overallocation: More than half of pension funds globally have exceeded their private equity targets due to slow exit pace and lower distributions

🔮 Trends to Watch

• 🎓 Banking Talent Wars: Investment banks implementing quarterly certification requirements and termination threats to retain junior talent from PE poaching

  
  

• 📊 Evergreen Fund Growth: Surge in evergreen private market funds coming to Canadian market, offering more flexibility than traditional closed-end structures

  
  

• 🏛️ Regulatory Resistance: JPMorgan CEO Jamie Dimon calls on-cycle recruitment "unethical," citing conflict of interest concerns with confidential information access

  
  

• 💸 Family Office Shift: Family offices increasingly allocating to private credit due to regular income generation versus private equity's exit-dependent returns

  
  

• 🌐 Trade Policy Impact: Trump's tariff policies creating opportunities for private credit in infrastructure financing as companies shift operations domestically

  
  

• 🔄 GP-Led Secondaries: Growing trend of traditional buyout firms launching secondary strategies to compete with established players like Lexington Partners and Ardian

  
  

• 🏦 Credit Market Competition: Private credit managers offering features like delayed draw commitments and payment-in-kind options to compete against syndicated market

🔮 Trends to Watch

• 🎓 Banking Talent Wars: Investment banks implementing quarterly certification requirements and termination threats to retain junior talent from PE poaching

  
  

• 📊 Evergreen Fund Growth: Surge in evergreen private market funds coming to Canadian market, offering more flexibility than traditional closed-end structures

  
  

• 🏛️ Regulatory Resistance: JPMorgan CEO Jamie Dimon calls on-cycle recruitment "unethical," citing conflict of interest concerns with confidential information access

  
  

• 💸 Family Office Shift: Family offices increasingly allocating to private credit due to regular income generation versus private equity's exit-dependent returns

  
  

• 🌐 Trade Policy Impact: Trump's tariff policies creating opportunities for private credit in infrastructure financing as companies shift operations domestically

  
  

• 🔄 GP-Led Secondaries: Growing trend of traditional buyout firms launching secondary strategies to compete with established players like Lexington Partners and Ardian

  
  

• 🏦 Credit Market Competition: Private credit managers offering features like delayed draw commitments and payment-in-kind options to compete against syndicated market

🌍 Market Spotlight: Regional Developments

• 🇺🇸 United States: VC-backed companies are on track for their fewest IPOs in a decade, with only 27 going public in H1 2025

  
  

• 🇪🇺 Europe: Private-equity deal activity in Europe exceeded North America by deal count during H1, with 515 exits vs 494 in North America

  
  

• 🇦🇺 Australia: Mercer Superannuation Australia will add private equity to default pension options for the first time, targeting 5% allocation

  
  

• 🇦🇪 Middle East: Private equity and venture capital investment in Gulf Cooperation Council countries totaled $1.77 billion in H1 2025, representing 37% of Middle East deal value

  
  

• 🇨🇦 Canada: Bain Capital is considering a sale of its stake in Canada Goose Holdings, gauging interest from potential buyers including other PE firms

  
  

💼 Deal Spotlight: Transactions & Strategies

• 🏨 $1.1B - TPG Capital finalized acquisition of Sabre Corp.'s hospitality software business for this amount

  
  

• 📱 $220M - CVC Capital Partners led this investment in Singapore-based embedded SIM card provider Airalo

  
  

• 🏠 $1.1B - Pacific Equity Partners agreed to takeover Johns Lyng, an insurance repair company, for approximately this amount

  
  

• 🚗 Multi-billion Euro - FountainVest Partners is the last remaining bidder for ZF Friedrichshafen's airbags and seat belt business (ZF Lifetec)

  
  

• 💳 $950M - Morgan Stanley is seeking leveraged loans to refinance BetaNXT Inc.'s debt from private creditors

  
  

• 🏭 $280M - Sixth Street Partners is leading financing for Flexitallic Group, a sealing solutions company

  
  

• 🚗 $510M - Deutsche Bank and SeaTown Holdings are providing private credit loan to VinFast Auto

💰 Fundraising Focus: Capital Formation

• 🎯 $3.6B+ - Levine Leichtman Capital Partners secured this amount at final close of its seventh flagship fund

  
  

• 💼 $2B - New Mountain Capital aims to raise this amount for debut secondaries strategy, while Warburg Pincus targets similar amount for continuation funds

  
  

• 🏥 $375M - Zenyth Advisors closed its second fund targeting healthcare services companies

  
  

• 🏭 $300M - Saothair Capital Partners closed its second fund targeting manufacturing companies

  
  

• 🇸🇦 1B Riyals - Saudi Awwal Bank's investment arm plans to raise this amount for its first private credit fund focused on MENA region

  
  

• 💎 €1B+ - Tikehau Capital raised this amount for a private equity continuation fund dedicated to architectural services company Egis SA

📊 By The Numbers

• 🎯 $4.5B - Haveli Investments closed its debut software fund at this amount, making it the biggest debut flagship fund ever

  
  

• 💰 $820M - iCapital raised this amount in funding, valuing the private-markets fintech at over $7.5 billion

  
  

• 📈 $386.42B - Global private equity and venture capital deal value in H1 2025, up 18.7% year-over-year

  
  

• 🏦 $37.8B - Combined overallocation amount by the top 10 pension funds globally above their private equity targets

  
  

• 🌏 $2B - BlueFive Capital raised this amount for its debut Gulf-focused private equity fund

  
  

• 💸 $3.1T - Global capital represented by family offices, with a third wanting to increase private credit allocations according to BlackRock's 2025 survey