The Concentration Game

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. 

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🧠 THE BIG IDEA

When Democratization Breeds Concentration

Trump's upcoming executive order promises to democratize private equity by directing regulators to open 401(k) plans to alternative investments. The $12.2 trillion opportunity sounds like a win for competition and investor choice. Here's the paradox: this push toward democratization may actually accelerate unprecedented industry concentration.

Blackstone President Jon Gray revealed the competitive reality: "it's going to be about firms with brand names and the right legal approaches and track record." With only 2.2% of plan sponsors currently offering alternatives, we're looking at a 97.8% untapped market. But when you democratize access to exclusive assets, you don't democratize market share—you create new gatekeepers with concentrated power.

📈 MARKET MOVERS

• 🏢 Audax Private Equity Completes Exit of Stout
  Audax sold global advisory firm Stout to New York-based Integrum Holdings LP, marking the second exit from the firm's Financial Services specialization in two months. During Audax's four-year hold, Stout's employee count and performance more than doubled through 10 acquisitions and deep human capital investments.
  Read the details →

• 💉 Bavarian Nordic Agrees to $2.99 Billion Private-Equity Takeover
  Danish vaccine maker Bavarian Nordic accepted a takeover offer from Permira and Nordic Capital at 233 kroner per share, representing a 21% premium. The deal, expected to close in Q4 2025, demonstrates continued PE appetite for healthcare assets with defensive characteristics.
  View the analysis →

• 🏬 PE Firm Set To Pay Nearly $1B For 119 JCPenney Stores
  Boston-based Onyx Partners agreed to purchase a portfolio of 119 JCPenney stores for $947 million in an all-cash transaction. The deal, involving properties across 35 states averaging 133K SF each, highlights PE interest in distressed retail real estate opportunities.
  Get the insights →

🔍 DEEP DIVE

The Great Concentration: How 401(k) Access Creates New PE Gatekeepers

The executives pushing hardest for 401(k) access to private equity aren't talking about democratization—they're talking about domination. While Trump's executive order promises to level the playing field by opening retirement accounts to alternative investments, the early positioning reveals a different story entirely. We're witnessing the construction of new barriers disguised as the removal of old ones.

The Infrastructure Moat Widens

What separates Apollo Global Management and State Street's existing target-date funds with private components from the hundreds of other PE firms scrambling to catch up? Years of patient infrastructure building that most competitors simply cannot replicate at scale. When Blue Owl announces private market investment products through Voya Financial, that partnership represents relationships, systems, and regulatory navigation capabilities that took years to develop.

The numbers from Blackstone illuminate the strategic advantage at work. Second-quarter wealth channel sales of $10 billion didn't emerge overnight—they represent the culmination of a systematic pivot toward retail distribution that began years ago. The fact that private wealth clients now account for a quarter of Blackstone's $1.2 trillion in assets reveals something profound: the firm has essentially built a parallel business model while competitors remained focused on traditional institutional fundraising.

This creates a feedback loop that accelerates concentration. Success in retail distribution generates more assets under management, which provides more resources to invest in better retail capabilities, which generates more retail success. The firms starting this race from behind aren't just competing for market share—they're competing against compounding advantages that grow stronger with each quarterly reporting cycle.

The Brand Premium Becomes Everything

Jon Gray's comment about "firms with brand names and the right legal approaches and track record" wasn't corporate speak—it was market prediction. In institutional private equity, performance ultimately matters more than reputation. Limited partners have the sophistication to evaluate track records, understand risk-adjusted returns, and make nuanced decisions about manager selection.

Retail 401(k) participants operate under completely different constraints. Plan sponsors selecting investment options for millions of employees won't choose based on IRR calculations from Fund III vintage 2018. They'll choose based on name recognition, regulatory comfort, and scale indicators that suggest stability and permanence.

This shift fundamentally alters competitive dynamics across the industry. A $2 billion middle-market fund with exceptional returns becomes irrelevant if it lacks the brand recognition and compliance infrastructure to participate in 401(k) distribution. Meanwhile, a mega-fund with merely good returns but established retail capabilities captures enormous flows simply by being accessible.

The democratization rhetoric obscures this reality. When regulators remove barriers to 401(k) participation, they're not creating equal opportunity—they're creating a winner-take-most scenario where brand premium becomes the primary competitive advantage.

The Scale Economies of Retail Distribution

Here's what the current positioning reveals about future market structure: the firms moving fastest toward 401(k) readiness are the same firms that already dominate institutional fundraising. This isn't coincidence—it's the logical result of scale economies that become more pronounced as you move down-market.

Blackstone's 30% growth in wealth channel sales reflects more than marketing success. It represents the firm's ability to absorb the compliance costs, technology investments, and distribution relationships required for retail success while maintaining margins that smaller competitors cannot match. When you're managing $1.2 trillion in assets, the fixed costs of 401(k) infrastructure become rounding errors. When you're managing $5 billion, those same costs become existential threats to profitability.

The executive order directing the Labor Department and SEC to develop guidance will likely create additional complexity layers that favor established players. Each new regulatory requirement, compliance standard, or reporting obligation increases the minimum scale required for economical participation. The very process of democratization becomes a concentration accelerator.

What This Means for Market Evolution

The 2.2% of plan sponsors currently offering alternatives represents more than untapped opportunity—it represents a market structure about to undergo permanent alteration. If even 10% of the $12.2 trillion in 401(k) assets eventually flows to private equity, that's $1.2 trillion in new capital. For context, that's roughly equivalent to Blackstone's entire current asset base.

But this capital won't distribute evenly across the industry's thousands of funds. Based on current positioning and infrastructure development, it will likely concentrate among a handful of mega-managers who've spent years preparing for exactly this moment. The result will be an industry where the largest firms become significantly larger while middle-market players face an increasingly difficult path to scale and sustainability.

The ultimate irony of democratizing private equity access through 401(k) plans: it may create the most concentrated asset management oligopoly in financial history, all in the name of giving ordinary Americans the same investment opportunities as institutions. When access becomes universal, the gatekeepers become more powerful than ever.

🧰 TACTICAL TAKEAWAYS

• Prioritize retail-ready PE managers over traditional institutional players by focusing on firms like Blackstone with proven wealth channel growth and Apollo with existing target-date fund infrastructure rather than middle-market specialists lacking 401(k) distribution capabilities.

• Time 401(k) allocation decisions around regulatory implementation cycles by recognizing that firms with existing compliant structures will capture early market share while competitors navigate DOL and SEC guidance requirements over the multi-year rollout period.

• Weight brand recognition heavily in PE manager selection by acknowledging that 401(k) plan sponsors prioritize name recognition and regulatory stability over pure performance metrics when selecting investment options for millions of retail participants.

  
  

🧵 WEEKEND READS

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

• 💼 Wall Street Banks and Private Equity's Tussle Over Junior Talent
  JPMorgan CEO Jamie Dimon called early PE recruiting "unethical," prompting Apollo and other firms to delay hiring until candidates complete banking programs. The Financial Times explores how this recruiting calendar acceleration has created stress and conflicts of interest concerns across Wall Street.
  Listen to the discussion →

• 🔄 Private Equity Recycles Assets as Traditional Exits Stall
  Nearly 20% of all private equity sales now use continuation funds, where firms sell assets back to themselves through new vehicles, reaching a new record. The Financial Times examines whether this "recycling" strategy represents sustainable innovation or concerning dependency on internal liquidity.
  Read the analysis →

• 🏢 EQT and CPP's $2.5 Billion Bet on Regulatory Technology
  The acquisition of Neogov by EQT and Canada Pension Plan Investment Board signals growing institutional interest in compliance-focused software for public sector agencies. The deal highlights how regulatory complexity creates defensible market positions in the government technology sector.
  View the insights →

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The OneFund Team

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