Private equity's $29 trillion seizure of retirement savings exposed
Private Asset Managers Eye Main Street Investors' Retirement Funds
In a bid to expand their reach, private asset managers are partnering with mutual fund and asset management providers to offer private assets, such as private credit and private real estate, to individual investors through mutual fund-like structures.
This trend is exemplified by Blackstone, which has formed strategic partnerships with companies like Legal & General (L&G), a major UK insurer and asset manager, to offer hybrid credit solutions that blend private credit investments with public market strategies. The aim is to deliver diversified, investment-grade private assets to a wider range of investors, including individual investors.
Blackstone's offerings include the Blackstone Real Estate Income Trust (BREIT) and the Blackstone Private Credit Fund (BCRED), designed to provide individual investors with access to institutional-quality private real estate and private credit investments.
The potential implications for Main Street investors are significant. With these new investment vehicles, individual investors can now access private market strategies that were once restricted to institutional investors, potentially offering diversification benefits beyond traditional public equities and bonds. Products like BREIT and BCRED aim to provide attractive income through private real estate and credit, which may help meet the growing demand for yield in a low-interest-rate environment.
However, private assets often have less liquidity, valuation challenges, and higher fees compared to traditional mutual funds. Main Street investors should consider these factors before investing.
The push to put private assets into ordinary Americans' portfolios has raised concerns from Moody's, which has expressed worries about potential liquidity risks and the encouragement of dumber deals in credit. Despite these concerns, private asset managers have been gathering money from high-net-worth individuals for more than a decade but haven't cracked regular investors' $29 trillion retirement nest egg.
Notable players in the market for small-company 401(k)s, such as Empower, are working with firms like Apollo, Franklin Templeton, Goldman Sachs, and others to offer retirement savers collective investment trusts containing a mix of private equity, private credit, and real estate.
Vanguard, Wellington, and Blackstone formed a strategic alliance in April 2021 to offer products for individual investors blending private and public market assets. The WVB All Markets Fund, the first product of this alliance, is a closed-end interval fund offering quarterly redemptions.
The target date market, amounting to $4 trillion and growing rapidly with a 30% annual compound growth rate over the last 15 years, is another area of interest for private asset managers. Vanguard controls 37% of the target date market.
As the private equity industry, with more than $10 trillion in assets under management and built on high fees and long-term commitment from institutional investors, continues to evolve, the shift in the retail investing landscape could be transformative. The alliance between Vanguard, Wellington, and Blackstone is a significant step in this direction, with Vanguard president and chief investment officer Greg Davis expressing a belief that private assets will start to serve a role in target date funds over time.
In summary, firms like Blackstone are democratizing access to private assets for individuals, potentially offering enhanced diversification and income opportunities but also introducing new investment complexities and liquidity considerations for Main Street investors. The partnership approach suggests a trend where large alternative asset managers are leveraging mutual fund platforms and insurance companies to broaden the distribution of private market investments, transforming how private equity and credit are accessed by everyday investors.
- Blackstone, through partnerships with companies like Legal & General, aims to invest Main Street investors' retirement funds in private assets, such as private credit and private real estate, using mutual fund-like structures.
- The offering of Blackstone's products, such as the Blackstone Real Estate Income Trust (BREIT) and the Blackstone Private Credit Fund (BCRED), could potentially provide individual investors with access to institutional-quality private assets, offering diversification benefits that extend beyond traditional public equities and bonds.
