The chief investment officer of New York City’s $326bn pension system has criticised rising private equity fund expenses and warned that managers’ growing focus on retail investors could undermine relationships with institutional investors, according to Private Equity Wire. Monte Tarbox, chief investment officer of the New York City Retirement Systems, made the remarks in comments reported by the Financial Times.
NYC Retirement Systems CIO flags expense items pushed to LPs
Tarbox told the Financial Times that an unnamed private equity firm recently sought to charge its investors for employees’ private jet travel, which he argued should be covered by existing management fees, according to Private Equity Wire. Speaking at the FT Future of Asset Management North America conference in Boston, Tarbox criticised a steady increase in costs passed on to limited partners. Tarbox questioned whether general partners continued to prioritise investors’ interests.
Retail fundraising focus tied to weakening LP terms
Tarbox linked what he described as deteriorating terms to private equity firms’ efforts to attract wealthy individual investors, as large alternative asset managers increasingly look beyond pension funds and other institutional clients for fundraising growth, according to Private Equity Wire. Tarbox warned that the growing focus on retail investors could undermine managers’ relationships with institutional investors.
Liquidity mismatch risk in retail private equity funds
Tarbox also warned about liquidity risks associated with retail private equity funds, where investors may seek to redeem holdings over shorter periods despite the long-term nature of the underlying investments. Tarbox predicted that this mismatch could trigger a crisis in the industry.
Large managers expand retail private markets offerings
Blackstone, KKR and Partners Group were cited as major managers expanding their private markets offerings to individual investors. 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 report described Tarbox’s comments as reflecting growing tension between private equity managers and institutional investors over fees, liquidity and the industry’s expanding reliance on retail capital.
Widely-known context: Private equity funds typically hold long-duration, illiquid investments, while investor redemption features can introduce liquidity pressures when withdrawals rise.
