(Dec 4): UBS Group AG’s billionaire clients are planning to curb allocations to private equity funds amid a global slowdown in the market that’s left many buyout firms struggling to raise new cash.
Almost a third of 87 individuals commanding 10-figure fortunes surveyed by UBS are looking to cut contributions to private equity vehicles over the next 12 months, the highest decrease of more than a dozen investment topics cited in the lender’s Billionaire Ambitions Report 2025.
At the same time, about half of those polled in the second half of this year said they intend to boost bets in the typically riskier area of buying stakes directly in companies, the highest increase among the same set of categories, the Zurich-based bank said in the report released on Thursday.
The responses reflect a rising apprehension among the world’s super-rich over betting on private equity funds. Higher borrowing costs have created a tougher dealmaking environment that’s narrowed profits for buyout firms and led to lower payouts for their clients, known as limited partners.
In an effort to overcome such obstacles, private equity firms have been turning to vehicles that allow them to roll over existing investments into new funds. More than 18,000 private capital funds worldwide are in the process of soliciting investor cash, according to a Bain & Co report published this year, translating into US$3 of demand for every US$1 of supply.
The ultra-rich are an increasingly important source of capital for buyout giants as pension funds and endowments hit limits on how much they can allocate to private equity. Germany’s Viessmann dynasty teamed up with KKR & Co last year for a US$3 billion ($3.89 billion) acquisition of renewable energy firm Encavis AG, while Michael Dell’s family office partnered with Silver Lake on a US$13 billion deal for talent agency Endeavor Group Holdings Inc that closed in March.
See also: Rio cuts costs, dials down lithium to build ‘simpler’ miner
Buying stakes directly in closely held companies as compared to doing so through funds allows wealthy investors to wield more control, even if they don’t acquire majority positions.
In the UK, HomeServe founder Richard Harpin is defying weak investor confidence in his native country and deploying a major chunk of the proceeds from selling the household repair business into striking direct private equity deals. Brookfield Asset Management bought HomeServe for about US$5 billion, completing the transaction in 2023.
See also: Toronto home prices continue to slide as listings stay elevated
Direct private equity deals also underpin a recent boom in valuations for sports teams, an increasingly prized asset class for the ultra-wealthy, even as owners of National Basketball Association and National Football League teams open up more to institutional money managers.
In October, NBA owners signed off on Mark Walter’s US$10 billion purchase of the Los Angeles Lakers, crushing the US$6.1 billion benchmark for a professional basketball team set in March by the Boston Celtics. The NFL’s New York Giants sold a 10% stake in October to Julia Koch and her family at a valuation of US$10.3 billion, setting a new high water mark in sports team values.
Uploaded by Tham Yek Lee
