The Fading Line

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

The Fading Line Between Public and Private Markets

The bright line that once separated public and private markets is rapidly dissolving. What began as strategic partnerships is evolving into a fundamental reshaping of investment access and fee structures.

KKR and Capital Group's launch of two joint products that allow individuals to access private debt with just $1,000 comes on the heels of similar moves by Blackstone with Vanguard and Apollo with State Street. These aren't isolated experiments — they're the early signs of an industry-wide shift.

The motivation is clear: alternative managers have largely maxed out their institutional capital sources just as traditional asset managers face increasing pressure from low-cost passive alternatives. This convergence creates mutual value that could accelerate the transformation of how private markets operate.

📈 MARKET MOVERS

⚖️ Magic Circle veterans launch PE-law firm advisory
Former Allen & Overy leaders have established a consultancy to facilitate private equity investments into legal services, signaling growing interest from firms like CVC, Cinven, and Permira in this traditionally partnership-based sector. Read the details

🏗️ Construction giant calls for revamped private finance model
Wates is proposing an "alliance investment model" that would revive PFI with government co-ownership and oversight, potentially unlocking significant pension fund capital for infrastructure while addressing previous failures. View the proposal

📊 Thoma Bravo exits Nasdaq position for $3.4 billion
The private equity firm has sold its remaining stake in the exchange operator through two separate transactions, completing its exit from the position acquired through the $10.5 billion Adenza acquisition in 2023. See the transaction

🏥 PE activity in disability services draws regulatory attention
Private equity firms have acquired over 1,000 disability and elder care providers in the past decade, prompting increased oversight from state regulators concerned about service quality and patient outcomes. View the report

🔍 DEEP DIVE

Strategic Necessity or Market Evolution? The New Public-Private Playbook

The traditional capital raising model for private equity is showing clear signs of strain. Institutional investors are nearing allocation limits, with distribution challenges creating fundraising headwinds. Meanwhile, retail capital remains the great untapped reservoir.

The economics are compelling for both sides. Alternative managers gain access to trillions in retail wealth while traditional asset managers can differentiate themselves from passive options. KKR and Capital Group explicitly stated they could eventually attract $100 billion to their joint strategy, a significant figure even for firms with $3.5 trillion in combined assets. However, it is buyer beware as many of these options have multi-layered and hidden fees, not to mention a limited set of products that investors can access.

That being said, Bain & Company research suggests this is just the beginning. As competition for retail dollars intensifies, fees for these hybrid products will likely continue compressing. The volume of retail flows may ultimately transform private assets into more liquid, public-like securities.

The implications extend beyond products to industry structure itself. While KKR and Capital Group considered but rejected a full merger, the blurring lines between public and private managers may lead to consolidation as these once-distinct business models increasingly overlap.

🧰 TACTICAL TAKEAWAYS

• Consider hybrid product allocation as fee compression and increased liquidity create a new middle ground between traditional PE funds and public market investments.

• Watch for regulatory developments as the growth of retail-focused alternatives will likely trigger increased oversight focused on valuation transparency and liquidity risk management.

• Evaluate consolidation opportunities as the convergence of public and private markets could accelerate M&A activity among asset managers seeking scale and complementary distribution channels.

🗳️ COMMUNITY POLL

🧵 WEEKEND READS

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

• 🌍 Private Equity Leaders Look Abroad as Policy Uncertainty Roils Markets - Top firms including Blackstone, KKR, and TPG are increasingly targeting European opportunities as U.S. tariff turbulence creates deal headwinds at home, with credit markets and climate-related investments particularly attractive.

• 🧳 Goldman, CVC Execs Moving to Milan: Tax Migration Accelerates - High-profile relocations of executives like Goldman's Richard Gnodde and CVC's Rolly van Rappard signal growing consequences of UK non-dom tax changes, though the scale of the exodus may be less dramatic than some predict.

• 🤖 AI in Healthcare: Private Equity's Next Frontier? - PE investors are increasingly focused on AI-driven healthcare opportunities, with real-world data on AI-discovered drugs in late-stage clinical trials expected to validate investment theses in the coming year.

• 🌊 Tariff Tides: Navigating the Crosscurrents in Private Equity - Recent U.S. tariff announcements are reshaping deal flows, valuations, and exit strategies across private markets, forcing firms to reassess portfolios and adapt investment approaches.

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The OneFund Team

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