Private equity warning to wealthy individuals

One scoop to start: One of Europe’s largest asset managers Legal & General is merging two investment units as it attempts to refocus the business on higher-profit markets.

In today’s newsletter:

• Private equity founder sends warning to wealthy investors

• Canada’s pensions reassess US markets

• European and Asian investors snap up global equity funds excluding US

Private equity founder sounds alarm over retail investments

A warning to wealthy individuals: private equity firms could be seeking to offload hard-to-sell companies on to a fund near you.

That is the view of Orlando Bravo, the billionaire co-founder of buyout firm Thoma Bravo, who reckons the growing pool of private funds aimed at individuals could leave them “saving” companies that private equity groups cannot sell, writes Alexandra Heal.

Retail investors are starting to fund so-called continuation vehicles, which buyout firms set up to buy companies from themselves either because they are struggling to sell them or want to cling on to them for longer.

“The retail investors might not be as sophisticated,” Bravo said. “There might be more risk of them not understanding what they’re involved in and this could create all sorts of problems.”

The private equity industry has found it difficult to sell assets that it bought at high prices during the rock-bottom interest rate era of the pandemic.

An influx of capital from retail investors into so-called evergreen funds, which have no end date and allow cash to be deposited and withdrawn at regular intervals, has partially helped fill the fundraising gap.

Bravo said that there were “incredible flows” of money arriving into the sector from wealthy individuals, noting that “ultimately there’s only so much money from the institutional community that you can access”.

Thoma Bravo, which manages over $179bn in assets and has returned $20bn in cash to investors in the past 12 months, currently has no offering for wealthy individuals.

Still, other private equity investors are taking advantage of the flood of capital from the affluent to cash out their buyout fund holdings at higher prices.

Canada’s pensions reassess US markets

Canadian pension plans, some of the world’s biggest investors, are following developments in US markets closely and looking to spread their assets.

Caisse de dépôt et placement du Québec — Canada’s second-largest pension fund — is seeking to invest more than £8bn in the UK over the next five years, writes Mary McDougall.

Charles Emond, CDPQ chief executive, told the Financial Times in an interview that he planned to increase the C$473bn ($343bn) fund’s assets invested in the UK and France by 50 per cent.

The UK was “top of the list” compared with many other countries, Emond said.

But he added that the fund’s US exposure would probably be “trimmed a little bit” as it was “at a peak after a decade of outperformance”. Still, he added that it remained the “deepest, biggest, closest market to us and we will continue to deploy money there”. 

The focus of Canadian pension funds on other regions comes as US markets have massively outperformed other markets in recent years, prompting many investors to look at rebalancing in a more rocky period for American markets over the past few months and a weakening of the US dollar.

The Canada Pension Plan Investment Board, which manages C$714bn ($516bn) pension assets for 22mn Canadians, said that 47 per cent of its portfolio was invested in the US at the end of March.

That marked an increase from 42 per cent in 2024, when Canadian executives launched a campaign to force the country’s big pension schemes to invest more in domestic assets, and just 36 per cent in 2023.

Chart of the week

European and Asian investors pumped record sums into global equity funds that exclude the US market after President Donald Trump’s return to the White House, writes Steve Johnson.

Investors put $2.5bn into world ex-US mutual and exchange traded funds between the start of December and the end of April, according to data from Morningstar. The inflows — more than $2.1bn of which came in the past three months — include the highest monthly total on record and mark a reversal after three years of net withdrawals.

The upsurge in interest has prompted a number of fund launches, with BlackRock, Germany’s DWS and Amundi among those to have listed ETFs.

“There is a question mark about the US’s role in the global economy and we have seen a reversal in flows, we have seen a consistent outflow for the first time in many years,” said Kenneth Lamont, principal of research at Morningstar.

“The US has been the location of choice for global capital and there are many investors who are questioning the US’s prime position within global markets as an investment destination.”

Global equity funds that exclude US stocks have been out of favour for years, amid a huge rally on Wall Street for most of the past decade or more that has sucked in foreign investors.

Investors pulled a net $2.5bn from these funds between 2022 and 2024. During that period the MSCI World ex-USA index gained just 7 per cent, compared with a 25 per cent rise in the S&P 500.

However, these funds have regained those lost assets in just five months, as investors have grown fearful that sweeping tariffs announced by Trump — who was elected for the second time in November and became president again in January — could cause more harm to the US itself than to other major markets.

Five unmissable stories this week

Phoenix, the UK’s largest savings and retirement business, is considering changing its name to Standard Life, in a move that would bring the historic brand back to the London Stock Exchange.

Paul Marshall, the hedge fund boss and co-owner of GB News, has called for the BBC to be broken up or sold, in a speech describing the national broadcaster as “an embodiment of anti-competitive market distortion”.

European pension funds and other long-term asset owners say they are doubling down on sustainable investing, even as the latest data shows some asset managers are still retreating from ESG investing after a political backlash in the US.

Robinhood, the US broker that shot to prominence in the 2021 meme stock craze, plans to take on UK investment platforms such as Hargreaves Lansdown by launching a stocks-and-shares Isa with no fees before the end of the tax year.

US authorities have warned that institutional investors could breach federal antitrust laws if they use their holdings in competing companies to influence corporate strategy in ways that reduce competition.

And finally

Encounters: Giacometti is the first in a trio of exhibitions at the Barbican showcasing historic sculptures by Alberto Giacometti alongside pieces by contemporary artists.

The year-long series has launched with a collection by Huma Bhabha as part of a display with Giacometti that explores timeless themes ranging from death and trauma to horror and humour.

Encounters: Giacometti runs at the Barbican until August 10.