How LPs Evaluate Human Capital

Welcome to this week's Capital Call - your Wednesday dose of private market insights without the jargon. At OneFund, understanding market shifts is crucial for making informed investment decisions.

Pour yourself something nice and dive in. 

🚪 WHO WE ARE We help qualified investors access the same private equity and VC funds that have traditionally been reserved for the ultra-wealthy and institutions. No million-dollar minimums or confusing paperwork. Why should only billionaires get the good stuff?

🧠 THE BIG IDEA

The Human Capital Advantage

Private equity just discovered its weapon. While critics debate leverage ratios and exit multiples, GPs quietly build moats through employee ownership and engagement.

The math is compelling and the top-performing funds share a pattern: they treat workers as assets, not expenses.

KKR leads this shift. Their portfolio companies deploy emergency assistance funds, financial literacy programs, and ownership sharing at scale. When a PE firm decides to share equity with workers, that impacts hundreds of thousands of employees across dozens of companies overnight.

We're seeing governance innovation that public markets can't match. PE's control structure allows rapid deployment of human capital initiatives across portfolios. The result? Employee retention, productivity, and exits. This isn't corporate social responsibility theater. It's advantage through human optimization.

The industry that critics love to hate might just solve corporate America's engagement crisis. While public companies debate quarterly earnings, PE firms build value through people.

📈 MARKET MOVERS

🏢 Brookfield Seeds $690M Evergreen Fund
Brookfield Business Partners sold minority stakes in three portfolio companies to launch an evergreen PE strategy targeting high-net-worth investors. The July 4 transaction reflects the industry's pivot toward democratized access beyond traditional institutional LPs. View the transaction →

🔧 Elliott and Veritas Restructure Cubic Debt
PE sponsors Elliott Investment Management and Veritas Capital reached agreement to restructure Cubic Corp's $1.4 billion debt while injecting fresh equity. The deal shows sponsors' commitment to supporting portfolio companies through challenging credit cycles, extending maturities and reconfiguring repayment priorities. Read the details →

🇦🇺 AustralianSuper Accelerates PE Push
Australia's largest pension fund announced increased allocation to unlisted assets, working to finalize four new PE manager relationships by year-end. Investment Chief Mark Delaney cited managers' strong long-term track records in "straight-down-the-line, conventional" private equity strategies. Get the insights →

⛏️ Fortescue Institutional Relief After Mining Rally
Mining giant Fortescue posted a 5.6% weekly gain after tumbling 21% over the past year, providing relief to institutional investors who hold 54% of the company. The rebound signals potential stabilization in commodities markets as private equity eyes distressed mining assets for operational turnarounds. View the analysis →

🔍 DEEP DIVE

The Mechanics of Mass Market Private Equity

The structural revolution underway

Here's what's interesting. The democratization of private equity isn't just about access. It's about completely reimagining how the asset class operates.

Traditional PE works on a simple premise. Raise a fund. Deploy capital over 3-5 years. Harvest returns in years 5-10. LPs commit capital and wait. This model worked brilliantly for pension funds and endowments with 30-year horizons. It falls apart for retail investors who might need liquidity in 18 months.

Enter the new architecture. Interval funds let investors redeem quarterly. Tender offer funds provide monthly liquidity windows. Evergreen structures eliminate the J-curve entirely. BlackRock's target-date innovation goes further. They're embedding PE allocations that automatically adjust as investors approach retirement.

The technology stack matters too. Firms are building infrastructure to handle millions of small accounts instead of dozens of large ones. Apollo partnered with State Street to create automated subscription processing. KKR developed proprietary tech to manage retail investor onboarding at scale.

Why now is different

We're seeing three forces converge. First, the denominator effect reversed. After years of public market outperformance shrinking PE allocations, institutional investors finally have room to deploy capital. Second, interest rates stabilized around 5%, making PE's return premium more attractive than during the zero-rate era. Third, regulatory clarity emerged. The DOL's latest guidance explicitly permits PE in 401(k)s with proper structures.

The data supports aggressive expansion. Middle market PE posted strong in Q1 2025. Distributions exceeded contributions for the first time since 2015. Secondary markets hit $150 billion in 2024, creating liquidity mechanisms that didn't exist five years ago.

The new playbook emerging

Smart firms aren't just repackaging institutional products. They're building from scratch for retail needs. Fees compress from 2-and-20 to 1.5-and-15. Minimums drop from $5 million to $50,000. Reporting shifts from quarterly PDFs to real-time dashboards.

Distribution strategy evolves too. Wirehouses like Morgan Stanley and UBS become critical channels. Independent RIAs need education and support. Digital platforms enable direct-to-consumer models. The firms winning this race understand retail distribution requires different muscles than institutional fundraising.

Risk management transforms as well. Retail-focused funds emphasize diversification over concentration. They favor steady compounders over turnaround plays. Leverage ratios trend lower. Hold periods shorten. The risk-return profile adjusts for investors who can't afford to lose principal.

What this means for markets

The implications cascade through the ecosystem. With potentially $3.75 trillion flowing from 401(k)s alone (assuming 30% target allocations), PE dry powder concerns evaporate. Valuations could rise as more capital chases deals. But discipline might actually improve. Retail investors demand transparency that forces better governance.

We're already seeing behavioral shifts. GPs extend fund lives to smooth returns. They prioritize consistent distributions over grand slams. They communicate differently, replacing jargon with clarity. The institutional LP's patience gets replaced by retail's expectations for steady progress.

Competition intensifies across channels. Traditional asset managers like Fidelity and Vanguard eye PE partnerships. Fintech platforms democratize access further. Robo-advisors incorporate alternatives. The landscape in 2030 will look radically different than today.

Here's the bottom line. Private equity spent four decades perfecting a model for institutional capital. The next decade rewrites every assumption for retail money. The firms that adapt fastest capture the largest wealth transfer in financial history. Those that don't become history themselves.

🧰 TACTICAL TAKEAWAYS

• Focus on managers with digital infrastructure expertise
  Target managers with relationships with hyperscale technology companies seeking capital solutions beyond traditional corporate finance. These firms capture the shift as corporations choose private markets for infrastructure investments requiring operational expertise alongside capital.

• Monitor secondary market opportunities for liquidity
  As retail money enters PE, expect secondary volume to explode beyond the current $150 billion market. Dedicated strategies focusing on providing liquidity to retail-oriented funds could see returns. Consider increasing allocations to secondary funds with retail liquidity expertise.

• Evaluate human capital-focused GP strategies
  PE firms implementing employee ownership and engagement programs demonstrate competitive advantages through retention and productivity gains. Focus on managers building human capital capabilities that drive the 23% profitability premium from workforce engagement documented by research.

🧵 WEEKEND READS

(Because some light market analysis pairs wonderfully with Saturday coffee)

• 💼 Drive Capital's Columbus Comeback Story
  TechCrunch profiles how the Ohio-based VC firm returned $500 million to investors in a single week despite losing a co-founder three years ago. Their contrarian strategy of targeting $3 billion exits over unicorn hunting shows there's value beyond Silicon Valley's hype machine.

• 📉 Private Equity Fundraising Hits Three-Year Low
  WSJ Pro reports U.S. buyout funds raised just $149 billion in H1 2025, putting the industry on track for its third consecutive annual decline. With only 247 funds closing globally versus nearly 1,700 in 2022, the concentration toward mega-funds accelerates while smaller managers struggle for capital.

• ⚛️ Uranium Awakens from Price Slumber
  ETF Database examines uranium's resurgence following Trump's nuclear executive orders and AI's power demands. With uranium miners outperforming the S&P 500 over five years, the analysis highlights how small-cap exposure through ETFs like URNJ captures growth potential in critical minerals markets.

👋 WANT IN?

In these turbulent times, understanding the nuances of private market investments is more crucial than ever. Schedule a discovery call with OneFund further discuss private equity and the current market.

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The OneFund Team

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