Key Takeaways
- • Monte Tarbox, chief investment officer of the New York City Retirement Systems, which manages a $326bn pension system, criticised rising private equity fund expenses, according to the Financial Times.
- • Tarbox said an unnamed private equity firm recently asked its investors to cover employees' private jet travel, a cost he argued should be covered by existing management fees.
- • Tarbox warned that managers' growing focus on retail investors could undermine relationships with institutional limited partners and could trigger a liquidity-driven crisis in retail private equity funds.
- • Blackstone, KKR and Partners Group are among major managers expanding private markets offerings to individual investors, and Partners Group has recently faced redemptions from its flagship retail alternatives funds.
Summary
Monte Tarbox, chief investment officer of the New York City Retirement Systems, has criticised rising private equity fund expenses and warned that the industry's growing focus on retail investors could weaken its ties to institutional clients. His comments, reported by the Financial Times, were delivered at the FT Future of Asset Management North America conference in Boston.
According to the FT, Tarbox said an unnamed private equity firm recently sought to charge investors for employees' private jet travel. He argued that such costs should be covered by existing management fees. He criticised the steady increase in expenses passed on to limited partners and questioned whether general partners continued to prioritise investors' interests.
Tarbox linked the deterioration in terms to private equity firms' efforts to attract wealthy individual investors. Large alternative asset managers are increasingly looking beyond pension funds and other institutional clients for fundraising growth. Blackstone, KKR and Partners Group are among the major managers expanding their private markets offerings to individuals.
Tarbox also reportedly warned of liquidity risks in retail private equity funds, where investors may seek to redeem over shorter periods than the long-term nature of the underlying investments allows. He predicted this mismatch could trigger a crisis in the industry. The article notes that Partners Group has recently faced redemptions from its flagship retail alternatives funds, including a decision to separate underperforming private equity investments from newer holdings after restricting withdrawals.
The comments reflect growing tension between private equity managers and institutional investors over fees, liquidity and the industry's expanding reliance on retail capital.
According to the FT, Tarbox said an unnamed private equity firm recently sought to charge investors for employees' private jet travel. He argued that such costs should be covered by existing management fees. He criticised the steady increase in expenses passed on to limited partners and questioned whether general partners continued to prioritise investors' interests.
Tarbox linked the deterioration in terms to private equity firms' efforts to attract wealthy individual investors. Large alternative asset managers are increasingly looking beyond pension funds and other institutional clients for fundraising growth. Blackstone, KKR and Partners Group are among the major managers expanding their private markets offerings to individuals.
Tarbox also reportedly warned of liquidity risks in retail private equity funds, where investors may seek to redeem over shorter periods than the long-term nature of the underlying investments allows. He predicted this mismatch could trigger a crisis in the industry. The article notes that Partners Group has recently faced redemptions from its flagship retail alternatives funds, including a decision to separate underperforming private equity investments from newer holdings after restricting withdrawals.
The comments reflect growing tension between private equity managers and institutional investors over fees, liquidity and the industry's expanding reliance on retail capital.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.