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 their relationships with institutional investors, according to a report by the Financial Times.
Monte Tarbox, chief investment officer of the New York City Retirement Systems, told the FT, an unnamed private equity firm recently sought to charge its investors for employees’ private jet travel, an expense he argued should be covered by existing management fees.
Speaking at the FT Future of Asset Management North America conference in Boston, Tarbox criticised the steady increase in costs passed on to limited partners, questioning whether general partners continued to prioritise investors’ interests.
He linked 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.
Tarbox also reportedly warned of 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. He predicted the mismatch could trigger a crisis in the industry.
Blackstone, KKR and Partners Group are among the 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 comments reflect growing tension between private equity managers and institutional investors over fees, liquidity and the industry’s expanding reliance on retail capital.
