When Wall Street needs main street

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 Wall Street's Most Exclusive Club Needs Main Street's Money

Brian Selmo of First Pacific Advisors posed the question that's reshaping private equity's future: "If private equity isn't able to tap retail capital in a meaningful way, we may be at a point where the growth in private equity starts to slow down a little bit."

Behind this observation lies a reality few in the industry want to acknowledge. Some "famous leaders" in institutional investing are now shopping chunks of their PE portfolios rather than adding to them. After four decades of institutional investors driving PE growth by steadily increasing allocation percentages, something fundamental has shifted.

The implications reach far beyond fundraising cycles or market timing. If Selmo's assessment proves correct, PE faces a structural constraint that could redefine how the industry sources capital, structures products, and ultimately grows. The question isn't whether retail access would be nice to have—it may be whether PE can maintain its expansion without it.

📈 MARKET MOVERS

🤝 New York State Pension Commits $1.4B to PE in Single Month
NYSCRF allocated more than $1.4 billion to private equity in March alone, including $500 million to KKR's North America Fund XIV and $300 million to Veritas Capital Fund IX focused on aerospace and defense. The $273 billion pension fund's aggressive deployment contrasts sharply with reports of institutional LP fatigue elsewhere, suggesting geographic and institutional variation in appetite for PE exposure. Read the details →

🏛️ Trump Expected to Issue PE-Friendly 401(k) Executive Order
The president is expected to encourage more private equity and alternative investments in defined contribution plans through executive action within weeks. While lacking authority to mandate increased adoption, the directive aims to unlock access to the $12.2 trillion DC sector where PE currently appears in just 2.2% of plans, representing massive untapped potential for the industry. View the analysis →

💰 British PE Firm Hg Approaches $100B Milestone
London-headquartered private equity firm Hg is on track to surpass $100 billion in assets under management this month, cementing its position as the second-biggest British PE group behind CVC. The firm's success with software investments, including its defining portfolio company Visma preparing for London's biggest tech IPO in years, demonstrates PE's evolution toward sector specialization. View the report →

🔍 DEEP DIVE

How Private Equity Became Too Big for Institutions Alone

Brian Selmo's assessment cuts through market noise to identify the structural challenge reshaping private equity's future. His analysis reveals why the industry's retail pivot represents necessity, not opportunity.

When Your Best Customers Start Selling

"If private equity isn't able to tap retail capital in a meaningful way, we may be at a point where the growth in private equity starts to slow down a little bit," Selmo explained. This observation stems from actual behavioral changes he's witnessing among institutional investors.

The evidence appears in institutional behavior that would have seemed impossible a decade ago. Some "famous leaders" in the institutional space are shopping chunks of their private equity portfolios. These aren't distressed sales or forced liquidity events—they represent calculated decisions by sophisticated investors to reduce rather than increase PE exposure.

This matters because institutional investors have been PE's primary capital source for four decades. When your biggest customers shift from net buyers to net sellers, the fundamental growth equation changes. The industry faces what Selmo describes as institutional investors being "tapped out on private equity."

The Allocation Ceiling Effect

Selmo's observation about institutional saturation reflects a structural limit that was always inevitable but rarely discussed. For decades, PE growth was fueled by institutions steadily increasing their allocation percentages—from single digits to high double digits in many cases.

But allocation expansion can't continue indefinitely. Even the most PE-friendly institutions face portfolio balance requirements and fiduciary constraints that prevent unlimited concentration in any single asset class. When your traditional funding sources reach their natural allocation ceilings, growth requires new capital sources.

"The performance of private equity has been strong enough that it's really sucked up a lot of the capital that would have previously gone to those managers," Selmo noted about PE's historical competitive advantage. This success in capturing institutional flows created its own constraint as available institutional capacity became saturated.

The Scale Reality Driving Change

Selmo points to the market PE serves today: 80% of companies with $100 million-plus in revenue are private. This represents a massive addressable market requiring capital for operations, growth, and ownership transitions that traditional institutional sources alone cannot adequately serve.

The banking system adapted to this scale by changing its risk exposure model. "The banks are still exposed. They're just exposed at a lower attachment point and so actually in a much safer position than they would have been 15 or 20 years ago," Selmo observed. Private lending growth moved traditional bank risk off balance sheets while maintaining credit availability for PE transactions.

But this structural shift created capital requirements at scales that institutional allocations, even at their peak, cannot fill indefinitely. The addressable market has grown faster than institutional capacity to fund it.

Why Retail Becomes Inevitable

Selmo's conclusion leads to what many PE firms are beginning to acknowledge: retail capital isn't a strategic expansion opportunity—it's becoming essential for continued growth. The challenge lies in execution rather than theory.

The retail markets offer the scale that could support PE's next growth phase, but success depends on solving operational problems the industry never had to address. Traditional PE structures—closed-end vehicles with irregular capital calls and distributions—don't work for individual investors who may need liquidity or transparency that institutional LPs don't require.

The industry's ability to build products that serve different investor needs without compromising the operational flexibility that generates returns will determine whether PE maintains historical growth rates or enters a period of capital-constrained expansion. As Selmo's analysis suggests, the choice is becoming binary: successfully access retail capital or accept slower growth trajectories.

🧰 TACTICAL TAKEAWAYS

• Evaluate rollover decisions carefully when GPs launch continuation funds by analyzing the asset's growth trajectory, additional capital requirements, and GP's track record with extended hold periods versus taking immediate liquidity at current valuations.

• Assess continuation fund governance before committing to GPs who regularly use these structures, focusing on independent valuation processes, LP advisory committee involvement, and transparent communication about conflicts between buyer and seller roles.

• Plan for continuation fund optionality in portfolio construction recognizing these structures provide partial liquidity events that can help manage overall portfolio pacing while maintaining exposure to high-performing assets beyond traditional fund lifecycles.

🧵 WEEKEND READS

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

• 📊 Private Equity Cuts Banks Out of M&A Fees - Bloomberg reports PE firms including Cinven, Platinum Equity, and Jacobs Holding are inserting portability clauses into debt agreements, allowing them to buy and sell companies without fresh borrowings. These provisions alarm bankers who stand to lose lucrative fees as portability spreads through the buyout industry.

• 🏛️ New York State Pension's $3B Private Equity Spree - NYSCRF's March allocation blitz included major commitments to KKR, Veritas Capital, and Aurora Partners, while also terminating a fixed-income manager relationship. The pension fund's continued PE appetite contrasts with reported institutional fatigue elsewhere, highlighting geographic variation in LP behavior.

• 📱 Wall Street Wants to Make Private Markets a Little More Public - The New York Times examines how fund managers, brokerages, and startups are racing to democratize private market access as companies stay private longer. From Robinhood's tokenized equities to Forge Global's $5,000 minimums, the infrastructure for retail private market investing is rapidly expanding beyond traditional accredited investor restrictions.

• 📊 Q2 2025 US PE Breakdown: Are We So Back? - PitchBook's comprehensive Q2 analysis reveals the structural headwinds behind PE's stalled recovery. From credit quality deterioration to inventory backlogs reaching 12,552 companies, the report provides the definitive assessment of why industry optimism hit reality at midyear.

👋 WANT IN?

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The OneFund Team

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