Markus Pimpl, managing director, private wealth Europe at Partners Group, explained that his firm has maintained a dedicated private wealth offering in the form of evergreen funds, nowadays referred to as semi-liquid funds, that it distributed through banks and wealth managers for more than 20 years. PG manages nearly €50bn of client money in those funds, which account for about one-third of the firm’s assets under management.
Structural shift from public to private equity
Pimpl noted that public companies have almost halved to 4,300 in the US since the early 2000s. That compares to 1.9m private companies with more than 50 employees, a potential playground for private equity firms such as Partners Group.
“In the 80s and 90s, the IPO was the highest level of corporate development.” He thinks that it is rather the opposite that take place nowadays as successful companies withdraw from the stock exchanges given the heavy obligations related to regulations associated with a stock market listing.
Interestingly, Pimpl noted another reversal of a trend. An increasing number of companies in the venture capital space, not yet earning money and coming from the tech sector, are going the IPO route as venture capitalists are not willing pay the IPO valuations.
The core business
The business of PG is to invest in “unlevered traditional buyout... we buy existing companies, we further develop them and sell them, ideally at a higher price,” stated Pimpl during an online interview on 14 February 2025. He explained that PG usually takes a majority ownership in a company to get full control and decide how it will create value.
Therefore, it is crucial to have in your ranks people from the industry when executing due diligence, analysis and assessing the potential of a targeted company. As the investment is in your book for five to seven years, “it’s a very different ball game compared to public equity,” said Pimpl.
In time of extreme crisis, overwhelming redemptions may require the general partner to dissolve a fund. Yet Pimpl explained that PG’s capital planning accounts for these potential events by maintaining capital at hand for contrarian investments, as appropriate.
Key lessons from Eltif 1.0
Pimpl explained that PG sold its first European long-term investment fund (Eltif) back in 2016 under the initial regulatory framework, or Eltif 1.0. The of the product became effective in January 2024.
Pimpl declared that PG was a pioneer in the Eltif business, which enabled the firm to gain experience against to current competitors, but also to drive the regulatory changes that led to Eltif 2.0.
It would be a massive breakthrough if there were an overall tax break for Eltifs
There are many benefits for closed-ended funds, given that the money is fully invested. However, Pimpl thinks that the structure may be more appropriate for very wealthy investors. There are practicalities that make them unsuitable for retail investors. For instance, he noted that investors commit to supply capital once it is called as the portfolio builds up. That works in an institutional set-up, but it is more cumbersome with retail investors. Pimpl also commented that even some European pensions complained about managing capital calls and distributions which explains, he thinks, why PG has been so successful with evergreen funds for more than 20 years.
Besides, he thinks that the distribution of closed-end funds was afflicted by the inadequate IT systems at most wealth managers across Europe, which were not designed for those funds. Consequently, he observed that distribution partnerships were set up mainly with the large banks that could adapt their systems given the complexity to operate and settle closed-end structures. In addition, Pimpl says with a sigh that Eltif 1.0 was not scalable given the required manual work to handle transactions.
During the Eltif 1.0 era, he noted that some countries, such as France and Spain, made the life of the pan-European Eltifs difficult given that they offered tax benefits only to their own local structures. However, Pimpl does not see changes on the horizon for the Luxembourg-based structures in the Eltif 2.0 regime. “It would be a massive breakthrough if there would be an overall tax break for Eltifs.”
Are retail investors protected?
He commented that from the get-go with Eltif 1.0, the approach of the European Commission was: “we give access, but we protect.” Not a shocking approach as he noted several financial incidents in Europe over the years with closed-end private markets funds sold to private individuals, such as the in Germany. He stressed that private individuals cannot afford, generally, the cost related to proper due diligence. That explains why they need to be protected.
However, Pimpl is concerned, under Eltif 2.0, that the focus of the EU is more on the quantity than the quality, as several asset managers are jumping on the Eltif bandwagon with little or no private market experience. “We see new names that weren’t present in private markets in the last years.”
It’s not a surprising observation, as several public equity investors are under intense pressure given the well-known underperformance of traditional funds against benchmarks and their loss of market shares in favour of low-fee exchange-traded funds. They are in dire need of finding new sources of revenue with larger margins.