Partners Group has teamed up with UBS to offer private markets investments to the Swiss bank’s wealthy clients, as interest in illiquid private markets continues to increase.
Jake Elmhirst, head of private markets content at UBS Wealth Management, told Private Equity International that the move illustrated the benefits of adding private markets to a client portfolio, both in terms of returns but also when it came to reducing volatility and increasing diversification.
Firms that have drawn in retail capital include Blackstone, KKR, Altamar Capital Partners, Pantheon and Tikehau Capital. Meanwhile, nearly half of European private banks surveyed by Cerulli Associates in May expect to increase their strategic allocation to private equity over the next 12 months, while 38 percent plan to increase their exposure to private debt.
Here are three things to know about the Partners Group-UBS alliance.
It will focus on directs
The firms said in a statement that the initiative would give UBS Wealth Management clients in Europe and Asia exposure to Partners Group’s direct private equity investments.
According to Christian Wicklein, head of distribution partners and liquid private markets at Partners Group, it focuses predominantly on direct investments via two structures: a joint initiative in which a sub-portfolio of Partners Group’s direct equity investments is offered to UBS clients; and a smaller sub-portfolio where the firm is sharing co-investments with UBS.
The joint initiative has an annual investment capacity of between $1 billion and $3 billion, and the co-investment sub-portfolio is expected to make up roughly 20 percent of the whole.
Partners Group also has a second initiative: its private markets European Long-Term Investment Fund, which is 10-year fund with the possibility to extend by two years. This is a type of collective investment framework that allows investors to put money into companies and projects that need long-term capital.
“What we are providing here is a multi-asset one-stop solution to Partners Group’s direct investments platform, which will invest across private equity, real estate [and] infrastructure, complemented with select private debt investments,” Wicklein said.
Investors can tap into PE buyouts at a lower threshold
UBS clients will be able to invest a minimum of €20,000 in the ELTIF, according to Elmhirst. A typical UBS aggregating vehicle would require at least €100,000 from each investor. Elmhirst said the lower minimum size made it much more accessible and that it sought to democratise access to private markets for the bank’s client base.
“What we have seen at UBS, particularly in the last three years, is tremendous growth in interest in private markets from our wealth management clients,” said Elmhirst.
“When you are in a low interest rate environment – and particularly more recently in very volatile markets – the asset class provides a great way for clients to diversify their portfolios and generate attractive absolute and risk-adjusted returns.”
Wicklein added that the private markets ELTIF has only one capital call, so it is a fully paid-in structure, which makes it more palatable for private individuals.
It’s not just about liquidity
“Liquidity – at least in the client perception – always plays a certain role,” said Wicklein. “But I think it’s more than that. It also comes down to how easy it is to access solutions, how difficult the administration is, as well as the hand-holding on the operational side.”
Partners Group has been offering products with liquidity elements to institutional investors for at least two decades. Wicklein said the firm has almost two decades’ experience of managing open-end or semi-liquid products, having launched its first institutional PE portfolio in 2001, and that it has built up more than $24 billion in AUM in that strategy.