Asset Managers Race to Democratize Private Markets | Weekly Pulse

WEEK IN REVIEW

This week in Private Markets, asset managers intensified their race to bring alternatives to retail investors, with BlackRock launching unified public-private portfolios, Vanguard holding preliminary talks with Carlyle and Blackstone, and Lincoln Financial becoming the first insurer to offer private market funds to individual investors.

Private credit continued its expansion as banks more than doubled lending to non-bank competitors to over $1 trillion despite regulatory scrutiny, while Marathon Asset Management's CEO highlighted credit markets' remarkable stability amid equity volatility.

On the fundraising front, Oakley Capital defied challenging conditions by raising €4.5 billion in just six months as Madison Dearborn sought its smallest fund since 1999, underscoring investor selectivity even as EQT's new private capital chiefs announced plans to target mis-priced public companies for take-private transactions.

1. MUST KNOW

Private credit tightens spreads amid fierce competition: 💰

• 📉 Credit funds are pushing boundaries to win deals, grinding down margins and increasing leverage to outcompete banks

• 📊 Spreads for top borrowers hit historic lows: 4.5 percentage points over SOFR in US and 4.75 over Euribor in Europe

• 🏛️ Despite expectations that the Trump administration would revive M&A, valuation gaps and market uncertainties persist

Private markets show resilience despite volatility: 💪

• 📈 Exit activity rebounded 49% year-over-year through Q4 2024

• 🏢 Commercial real estate values beginning to bottom after 2023 correction

• 🏦 Bank lending standards easing for multifamily and commercial properties

AI transforming both technology and infrastructure investing: 🤖

• 💻 AI captured 46% of venture capital deal value in 2024

• ⚡ Data centers expected to grow from 3% to 8% of total power demand by 2030

• 🔋 US power demand projected to grow at 2.4% CAGR through decade's end

Retail investor access rapidly expanding: 👨‍👩‍👧‍👦

• 💼 Private wealth allocations to alternatives growing at 57% 4-year CAGR

• 💵 Private equity firms coordinating efforts to access $12 trillion 401(k) market

• 🌱 CVC reports 200% YoY growth in private wealth channels through evergreen products

Private wealth projected to pour $9 trillion into alternatives by 2032: 💸

• 📊 Growing at 12% annual rate, significantly outpacing institutional investors' 8% growth

• 🔄 Narrowing allocation gap between private wealth (3-6%) and institutions (15-30%)

• 🔑 Only 36% of 263,000 U.S. advisors currently allocate client assets to alternatives

2. BY THE NUMBERS

• €6.25 billion: Size of Adevinta loan deal private credit lenders are nearing, among largest of its kind

• $4 billion: Approximate valuation of Dun & Bradstreet in pending Clearlake Capital acquisition

• $260+ billion: Amount raised by dollar-based private equity funds in China between 2020-2022, many now seeking extensions

• €200 billion: CVC Capital Partners' total AUM, with €40 billion available to deploy across strategies

• $17.2 trillion: Global alternative AUM across all strategies as of Q1 2025

• $10 billion: Value of Sycamore Partners' takeover of Walgreens Boots Alliance

• $162 billion: Record secondary market transaction volume in 2024

• $1.1 billion: Pantheon's latest dedicated GP-led secondaries fund, doubling predecessor's size

• $2.7 billion: Marathon Asset Management's new global opportunistic credit fund targeting market dislocations

• 15.4%: US private equity's 10-year annualized return, outperforming S&P 500 (13.4%)

• 11%: Increase in Asia-Pacific private equity deal value to $176 billion in 2024 despite declining deal count

• 50%: Potential reduction in average net management fees since the global financial crisis

3. MARKET SPOTLIGHT

Private credit spreads compressing amid competition: 📊

• 📉 Private funds accepting thinner margins to win deals, particularly for larger credits

• 🏆 Recent private loans pricing at historic lows: 4.5 percentage points over SOFR in US

• 🤝 Industry consolidating capital among largest firms following BlackRock's $12B acquisition of HPS

Regional market dynamics creating differentiated opportunities: 🌎

• 🇧🇷 Brazil: Itau Asset Management launching fund focused on securitized products amid rising rates

• 🇨🇳 China: PE funds seeking to extend investment periods as opportunities diminish

• 🇫🇷 France: Political and fiscal uncertainty driving private equity talent to Milan, Geneva, and Dubai

• 🇬🇧 UK/US: Central banks maintaining high rates, suggesting slower pace of cuts than initially hoped

Commercial real estate recovery gaining momentum: 🏢

• 📈 Values bottoming in late 2024 after sharp correction

• 🏘️ Multifamily lending increasing substantially

• 💰 Private credit lenders holding record $250 billion in dry powder for deployment

• 🔧 Nearly 50% of US commercial buildings over 45 years old, creating value-add opportunities

• 📊 Property prices fell 11.5% overall from 2022 peak, with office (-24.1%) and apartments (-19.2%) hit hardest

Credit markets showing stability despite equity volatility: 📈

• 🛡️ Marathon Asset Management CEO highlights credit market resilience with minimal spread widening

• 🔄 Investor rotation underway from equities (especially growth stocks) into credit markets

• 🚦 Selective sector positioning critical: pharmaceuticals offering value while autos face downgrades

• 💪 High-yield spreads widened only 50 basis points while prices remained stable

4. DEAL SPOTLIGHT

• Clearlake targets data analytics: 💻 The private equity firm is nearing acquisition of Dun & Bradstreet Holdings at approximately $4 billion valuation, with an announcement expected as soon as next week.

• Walgreens goes private in three-way split: 💊 Sycamore Partners' $10 billion takeover includes Executive Chair Stefano Pessina almost doubling his stake to 30%, with plans to split the business into three separate entities.

• Private equity enters professional sports: ⚾ The San Francisco Giants sold a 10% stake to Sixth Street to fund Oracle Park improvements and real estate development, continuing the trend of PE expansion into professional sports ownership viewed as attractive investments with multiple revenue streams.

• TDR explores gym chain continuation fund: 🏋️ After multiple failed sales attempts for the David Lloyd gym chain, TDR Capital is exploring transferring its stake to a continuation fund in a deal that could value the business between £1.8 billion and £2.3 billion.

• Dividend recaps accelerating as exit alternative: 💵 Over 20 US and European businesses have borrowed to pay dividends to PE owners this year (the fastest pace since 2021), highlighted by Clarios International's record $4.5 billion dividend to Brookfield, raising concerns about risk shift as PE firms reduce financial exposure while maintaining control.

• EQT seeks take-private opportunities amid volatility: 🎯 The firm's newly appointed co-heads of private capital are targeting "mispriced" listed companies and businesses with "messy capital structures," having already completed take-privates of Keywords Studios (£2.1 billion) and Dechra Pharmaceuticals, as market volatility creates acquisition opportunities.

5. FUNDRAISING FOCUS

• Marathon raises opportunistic credit fund: 🏦 The asset manager has closed its global opportunistic credit fund (MDCF II) with $2.7 billion in commitments, targeting market dislocations across both private and public credit markets while building on the success of its predecessor fund which has already returned 65% of invested capital.

• Pantheon doubles down on GP-led secondaries: 🔄 The firm has closed its Secondary Opportunities Fund II with $1.1 billion (nearly doubling its predecessor's size), focusing exclusively on GP-led continuation vehicles with companies showing ongoing growth potential while leveraging its 14-year track record in GP-led transactions.

• CVC sets fundraising records: 📊 The firm activated Europe/Americas Fund IX (the largest private equity fund globally) and Asia VI (both exceeding hard caps), secured €7.6 billion for European Direct Lending IV (versus €6 billion guidance), raised over $3.5 billion toward a $7 billion target for Secondaries Fund VI, and achieved 200% YoY growth in Private Wealth through evergreen products.

• Oakley Capital defies challenging environment: 🚀 The European private equity firm raised €4.5 billion ($4.9 billion) for Oakley Capital Fund VI within just six months, hitting its hard cap with a 58% increase over its predecessor, securing commitments from all existing investors plus €2.2 billion in fresh institutional capital from across Europe, North America, Asia, Australia, and Latin America.

• Mid-market firms face contrasting fundraising fortunes: 📈 While Falfurrias Capital Partners closed its sixth fund at $1.35 billion (surpassing its previous $850 million fund), Madison Dearborn is seeking only $3 billion for its ninth fund (its smallest since 1999 and down from five previous vehicles of $4+ billion), highlighting investor selectivity in a challenging environment that's seen Insight Partners and American Securities also fall short of targets.

6. INDUSTRY INSIGHTS

• Private credit premium persists despite compression: 📊 Direct lending continues to offer premium yields (10.7% vs. 6.1% for leveraged loans), with insurance companies driving expansion as they seek yield in a market that has shown remarkable stability with just one negative return year since 2008.

• NAV loans transforming private equity: 💼 This flexible financing tool is revolutionizing how GPs manage liquidity, with the market expected to reach $70 billion as firms embrace the ability to access capital without forcing early portfolio company sales.

• KKR builds "mini Berkshire" with Strategic Holdings: 🏛️ The firm is breaking from traditional buyout models by creating a portfolio of 18 long-term investments ($3.7 billion revenue, $900 million adjusted earnings) designed to generate $1.1 billion in annual dividends by 2030, directed by a tight-knit group including co-founders Kravis and Roberts focused on compounding returns over decades rather than quick flips.

• Private equity lobbying intensifies on multiple fronts: 🏛️ The industry is pursuing twin legislative victories: a Delaware corporate law overhaul making it harder for shareholders to beat companies and executives in court, and a two-letter tax code change (restoring "DA" in the EBITDA formula for interest deductibility) potentially worth billions in tax savings for leveraged companies.

• Asset managers race to bring private markets to retail: 💰 BlackRock has launched the first model portfolios combining public and private assets in a Unified Managed Account, while Vanguard has held preliminary talks with Carlyle and Blackstone about potential tie-ups, joining Capital Group (partnered with KKR) and State Street (with Apollo) in bringing alternatives to mass affluent investors.

• PE firms deploying strategic AI playbooks: 🤖 Leading firms are creating competitive advantages through organized AI implementation approaches, with nearly 20% of portfolio companies already showing concrete results including 40% cost reductions in content production, $5 million in new revenue from auto-fill features, and 22% productivity increases in software development.

7. TRENDS TO WATCH

• Secondary markets accelerating: 🔄 Transaction volumes reached a record $162 billion in 2024 as PE-backed companies face pressure from extended holding periods (now averaging 7 years), with both GPs and LPs increasingly seeking liquidity solutions driving AUM growth from $124 billion in 2013 to $509 billion in 2024.

• Continuation funds gaining prominence: 🔁 Private equity firms are increasingly using continuation vehicles when traditional sales or IPOs prove challenging, allowing extended holding periods while providing liquidity to existing investors, as exemplified by TDR's potential transfer of the David Lloyd gym chain.

• Dividend recaps returning: 💵 With 2025 seeing the fastest pace of dividend recaps since 2021, PE firms are increasingly using these transactions to recoup investments while maintaining control, raising questions about risk allocation as Brookfield received a record $4.5 billion dividend from Clarios International.

• Professional sports as private equity asset class: ⚾ Firms are rapidly expanding their presence in sports team ownership, viewing franchises as attractive investments with multiple revenue streams and associated real estate developments adding significant value proposition.

• Mid-market advantage emerging: 🎯 The less crowded $400M-$2B enterprise value space is offering differentiated returns as deployment challenges for mega-funds create opportunities, with middle-market firms consistently exceeding fundraising targets despite the challenging environment.

• PE carve-out deals no longer guarantee premium returns: 📉 Once reliable outperformers in private equity, carve-outs have seen average multiples fall from 3.0x to just 1.5x since 2012, with operational improvements declining dramatically as increased competition has eliminated the traditional "carve-out discount."

• Infrastructure investment boom driven by tech and energy transitions: ⚡ Global infrastructure AUM has surpassed $1.1 trillion (forecast to reach $2.3 trillion by 2029) as digital transformation drives unprecedented data center demand, energy transition requires $14 trillion in grid investments, and the asset class delivers 9.6% annualized returns with minimal volatility.