Private equity retail pioneer faces stiff competition

One scoop to start: Kevin Warsh is not permanently hawkish on monetary policy despite his reputation for a conservative stance on rates, according to Stanley Druckenmiller, the billionaire investor who once managed the Soros Quantum Fund.

In today’s newsletter:

• Private equity retail pioneer, Partners Group, faces stiff competition

• St James’s Place reports surge in new business and net inflows for 2025

• Hedge funds’ correlation with stocks picks up

Private equity pioneer Partners Group’s retail rivalry

Partners Group has long led the way among its private equity peers in seeking a broader base of clients in America for the once-exclusive asset class. But the firm has its headquarters not in New York, Washington or anywhere in the US.

From its base on the outskirts of Zug, 4,100 miles away from the centre of US policymaking, a Swiss investment colossus built a $185bn business by serving wealthy individuals products they could sell in and out of with ease.

Like other private equity firms, Partners Group wanted to offer its products to America’s giant retirement market: an untapped source of demand that had the potential to be hugely lucrative, and one that Partners was determined to unlock. But US rules hindered expansion into this area.

Last August everything changed when US President Donald Trump’s executive order made 401k savings accounts accessible to private equity.

But the firm that pioneered private equity for the people may not be the one to reap the rewards.

The victory came as Partners found itself suffering for the first time net redemptions at its flagship US fund and with new competition from rivals that have set their sights on the marketplace it developed.

Where groups such as Blackstone, Apollo and KKR previously wooed institutions to lock up capital for a decade, the $22tn private capital industry is now switching to a battle for the wealthy individuals and retirement savers that long formed the bedrock of Partners’ business.

“[Partners] invented the wealth market, but where are they really today with all these others launching products?” said one former senior employee.

New business at St James’s Place leaps

St James’s Place, the UK’s largest wealth manager, has reported a surge in new business and net inflows last year as retail investors sought financial advice ahead of the Budget.

The Gloucestershire-based group said the firm’s financial advisers attracted £21.9bn of new business, up a fifth on the previous year, while net inflows rose by 42 per cent to £6.2bn.

Mark FitzPatrick, chief executive of SJP, said the last few months of the year were “marked by protracted speculation” in the run-up to the Budget at the end of November, as uncertainty increased over potential changes to pension taxes and individual savings accounts.

However, SJP also reported “elevated short-term outflows” in the final quarter as many customers accelerated drawing their tax-free lump sum from their pension as a result.

SJP said these outflows and the level of engagement with customers returned to normal at the end of the year, in a trend that has continued in 2026.

SJP said its total funds under management last year increased to a record £220bn, up 16 per cent on the previous year.

The wealth manager overhauled its fee structure last summer following scrutiny from the financial regulator, separating its advice fees, product costs and other items.

The overhaul followed the introduction of the UK’s Consumer Duty in 2023 — new rules brought in by the Financial Conduct Authority aimed at ensuring customers receive a fair deal from financial services firms.

Its share price has jumped by about half over the past 12 months, valuing the company at just over £8.1bn.

Chart of the week

Hedge funds closely tracked moves in equity markets last year. Some analysts have raised concerns that the industry may not be in a position to protect investors should a sharp market sell-off occur.

The correlation between hedge fund returns and the MSCI World, a broad global equity market index, was the highest in at least five years according to research by BNP Paribas.

The research comes amid a roaring three-year bull market in global stocks that helped hedge funds make 12.5 per cent in 2025, their best year since 2009, according to data provider HFR. However, the research also adds to long-standing fears that these high-fee portfolios could struggle to protect investors during a market downturn, traditionally one of their strongest selling points.

“It’s a little scary especially when you look at the times that this has happened before,” said Jon Caplis, founder of hedge fund research firm PivotalPath, referring to previous occasions when a high correlation between equities and hedge funds has exacerbated big market sell-offs.

“Investors need to at least be aware and understand how much equity exposure they have in their overall portfolio and make sure that’s what they want at this time,” he added.

Investors poured money into hedge funds last year as their appetite for private equity waned, with inflows at their highest level since 2007.

Hedge funds demand premium fees from investors, traditionally a management fee of about 2 per cent plus performance fees of 20 per cent, although this has come down over time. In theory, the fees reward them for delivering high returns with low volatility that lessens the impact of market crashes on investors’ portfolios.

Denmark’s pension funds, managing 5.5tn DKr (€737bn), are under pressure to invest in domestic markets and reassess their exposure to the US on concerns about its fiscal position and tensions over the future of Greenland.

Fidelity star portfolio manager William Danoff plans to retire later this year. Danoff helped turn Contrafund into one of the world’s largest actively managed stock mutual funds.

Private credit firms sold a record amount of debt to themselves last year. They need new ways to generate cash from company loans owned by private equity.

A commercial real estate investment trust managed by Apollo is selling its $9bn loan portfolio to its own insurance arm Athene. Apollo has in the past criticised related-party transactions by insurers tied to its rivals.

Paul Singer’s Elliott Management has exited its profitable investment in AC Milan, the historic Italian football club it took over in 2018 and helped return to winning titles.

And finally

The new Welsh National Theatre has taken on an unusual first project under its new artistic director, Michael Sheen. He has chosen Thornton Wilder’s Our Town, a day in the life of Grover’s Corners, a fictional small town in New Hampshire where nothing happens but everything matters.

Swansea Grand Theatre to January 31, then touring, including Rose Theatre, Kingston, February 26-March 28