The small town of Baar in Switzerland is a long way from the bustle of Wall Street. Situated close to picturesque Lake Zug in the foothills of the Alps, its 25,000 inhabitants are generally more interested in skiing than finance. Yet on its main street, an unassuming glass office serves as global headquarters to a private equity firm that offers a different blueprint for the industry. Partners Group is not the largest private equity firm in the world – it manages just less than $150 billion of assets, compared with over $1 trillion at Blackstone – but unlike others, its origins lie less in dealmaking and more in distribution. As firms increasingly compete across asset classes and chase new sources of capital, Partners’ is the model many are converging on.

We’ve talked about permanent capital here before. Traditional private equity fund structures can raise a lot of capital but they don’t make for enduring firms because after around 12 years, all the money has to be handed back and the fund shut down. Nor are they especially convenient for retail investors – minimum investment amounts are high, tax treatment is laborious, net returns can be negative in the period where the fund is deploying capital, and cash flows are hard to manage as the fund draws down commitments and spits out distributions at the discretion of the manager. 

But as private markets nurture more value while public markets concentrate around fewer stocks, retail investors want in. To meet growing demand – as well as to extend their own growth runways beyond what institutions will allocate – firms are designing new products tailored for individual investors. Earlier this year, Blackstone launched Blackstone Private Equity Strategies Fund LP (BXPE). Its liquidity mechanism, $50,000 minimum ticket size, and simpler tax treatment have made it very popular. In its first six months, the fund has attracted $4.3 billion of capital. Across all its retail products, Blackstone raised more in the first half of this year than in the whole of 2023. It now manages $240 billion of private wealth money, equivalent to 22% of its total assets under management.

Blackstone cites first-mover advantage as key to gaining share in what it calls its wealth channel. It set up a Private Wealth Solutions business in 2011. But the real first mover was Partners Group, which sources close to 30% of its assets from retail. To understand more about this emerging trend, the features of successful firms, and the potential risks, read on.