Latest news with #MarcRowan
CNBC
13-07-2025
- Business
- CNBC
Coming to a 401(k) near you: Private market assets
Apollo Global Management CEO Marc Rowan told attendees at an investor conference last month that the day will soon come when private assets are accessible in Americans' retirement accounts. "I would expect at some point, in this administration's history or in the future, to be able to sell private markets into the 401(k) system," Rowan said on stage at the Morningstar Investment Conference in Chicago, Illinois, where the convergence of private and public markets was a major theme. Those comments come as no surprise from the billionaire CEO, who has long stressed the growing importance of private markets in investing. However, the idea is reaching a tipping point. Private market exposure in 401(k) plans was considered permissible in 2020, when the Department of Labor under the Trump administration issued an information letter indicating it could be appropriate for defined contribution plans under certain conditions. The guidance was later affirmed by the Biden-directed agency. But its presence is starting to expand. Asset managers and plan sponsors have created products for retirement vehicles in which Americans collectively hold roughly $8.7 trillion in assets, according to data on 401(k)s at the end of the first quarter of 2025 from the Investment Company Institute . In June, BlackRock, the world's largest asset manager, said it's launching a 401(k) target date fund in the first half of 2026 that will include a 5% to 20% allocation to private investments. In May, Empower, the country's second-largest retirement plan provider, said it's joining asset managers such as Apollo to start allowing private assets in some accounts later this year. Those developments come amid a broader push under Trump's second term in office to expand the definition of "accredited investors" to allow more people to invest in private markets through their 401(k)s. Within the retirement plan industry itself, the conversation is reaching a fever pitch. Bonnie Treichel, chief solutions officer at Endeavor Retirement, said, "If you're at retirement plan-related conferences right now, this topic is all the rage, so to speak." Similarly, Fred Reish, a partner at law firm Faegre Drinker said: "It's not just out there somewhere on the horizon, I would say that's in the immediate future." How it works The strategies created for 401(k)s thus far will be coming in the form of pooled investments such as collective trusts, or managed accounts overseen by professional investors, instead of standalone investments assessed by individual employees. Adding private assets to target date funds, which automatically adjust allocations based on a retirement date, is one option that's growing in popularity in the industry. The structure of those investments are meant to address some of the regulatory concerns around the assets, which have traditionally been excluded from 401(k)s even as they were embraced by pension funds and university endowments. The treatment stems from the perception that private investments have risks such as a lack of transparency, which raises predatory concerns, as well as higher fees and long lockup periods. The 2020 Labor Department information letter also attempted to address those concerns, outlining that investments into private assets made within 401(k)s must be done with prudence, or held to the standard of a person who is "familiar with such matters," without which a company or an asset manager can open themselves up to legal ramifications. "If fiduciaries make a bad investment, not bad an outcome, but bad both in outcome and bad in that they didn't really vet it properly, they can be sued, and they can be personally liable for damages," said Reish, who specializes in the Employee Retirement Income Security Act of 1974 (ERISA) that governs employee retirement plans. "So, not just the company, but also each individual member of the plan committee. Each of those officers and managers that serves on the plan committee can be personally liable. That's frightening." Intel, for example, had a lawsuit dismissed earlier this year by a federal appeals court in San Francisco after a yearslong dispute over its use of alternative assets in its retirement plans. Additionally, what that could also mean is that larger plan sponsors, which have the internal capabilities to vet private investments, could move faster to integrate privates into a 401(k) plan, rather than smaller companies. The case for privates Still, there are several reasons for the excitement around private assets in 401(k) plans. Proponents point out that the investable universe has shrunk over the last three decades, roughly halving to about 4,000 companies from more than 8,000 back in the 1990s, according to the Center for Research in Security Prices. At the same time, the dominance of the largest public companies grows increasingly pronounced with each passing year. CRSP found that the market cap of the top 10 companies accounted for 35% of the total market in 2024, more than double what it was before 2020. Meanwhile, more companies are staying private for longer. The decision helps executives build their businesses away from the glare of regulatory scrutiny or responsibilities to shareholders, but also makes it harder for investors to get in on the ground floor of the next Microsoft or Apple. Thus, the argument goes, private assets will give investors exposure to a market that looks markedly different from what it had in the past — even if it requires locking up capital for longer periods of time at greater cost and greater risk. Still, there are many who worry the risks far outweigh any benefits, calling private investments far too opaque for plan sponsors to do appropriate due diligence. "Being private does not make it better. It makes it less liquid," Apollo's Rowan told investors at the Chicago conference. "Our job is to deliver excess return."
Yahoo
04-07-2025
- Business
- Yahoo
Advisors Start Cramming to Meet Growing Private Market Demand
Time to hit the books. Private markets have the potential for great returns, and they have historically outperformed public ones. Many advisors steer clear of them, however, partially because of limited knowledge about how they actually work. It's an information gap many will have to address sooner rather than later. Apollo Global Management CEO Marc Rowan believes that allocations to private equity and private credit will make up a third of client portfolios in the near future. 'The vast majority of financial advisors may not go to private markets directly, [but] they will buy products that give them access to public and private markets,' he said during a Q&A at the Morningstar Investment Conference last week. If advisors are to stay competitive in Rowan's vision of the future, many are going to need a private markets crash course. READ ALSO: Trump's 'Big, Beautiful Bill' Is a 'Mixed Bag' for Advisors and Advisor Teams Are Getting Bigger. Here's Why Right now, advisors allocate an average of just 5% of clients' portfolios to alternatives, compared with 25% by institutions, according to Fidelity. Part of the gap is due to limited access, since private markets are typically restricted to accredited investors. But unfamiliarity also plays a big role. Private markets are complicated territory. 'You can't just enter a ticker on a platform and execute transactions,' said Laura Lutton, head of manager research at Morningstar, adding that private market investments often require separate investment platforms and client agreements. 'It creates a structural friction that keeps advisors reluctant to get involved,' she told Advisor Upside. Private markets also come with lower liquidity, less transparency, and complex fee structures — challenges that can be difficult to explain to clients. 'It sounds simple, but it's really not,' Lutton said. Morningstar is working to make those conversations easier by expanding its Medalist Rating framework later this year to include semiliquid funds, offering more transparency and helping identify strategies likely to outperform certain benchmarks. While, private markets may seem daunting, but advisors don't have to go it alone: One way advisors can become more familiar with private equity and private credit is through sponsors themselves. Major firms like BlackRock, KKR, iCapital and more offer CE credits through alternative investing courses. The CFA Institute also offers multiple courses and certifications on private markets. Do Your Homework. Some advisors are taking the independent study approach, like Alex Caswell of Wealth Script Advisors, who's been reading books and scholarly articles published in the CFA Institute's Financial Analysts Journal to understand whether the investments would be right for his clients. So far, he's not sold on them, especially private credit. 'PC has swallowed up a lot of the fast-and-loose loan and debt origination that was done by banks pre-2008,' he told Advisor Upside. 'Now, these PC funds are being shoved into portfolios left and right, and it comes with a lot of unevaluated risks that people aren't realizing.' This post first appeared on The Daily Upside. To receive financial advisor news, market insights, and practice management essentials, subscribe to our free Advisor Upside newsletter.
Mint
04-07-2025
- Business
- Mint
The risky world of private assets opens up to retail investors
This was supposed to be the year when initial public offerings (IPOs) came roaring back. Late in 2024 stockmarkets were hitting all-time highs and a cluster of privately owned superstars, with valuations in the tens or hundreds of billions of dollars, were preparing to go public. But now the market is frozen. As the world's trading system disintegrates before bosses' eyes, deals of all sorts, whether IPOs or mergers, have ground to a halt. The pause is robbing private-market investors—typically deep-pocketed institutions, or uber-rich individuals—of a big payout. It is also robbing smaller investors of a chance to invest in some of the world's most successful companies, such as Stripe, a payments firm, and Elon Musk's SpaceX. That is making an existing problem worse. Measured against the value of all stocks, the monthly value of equity issued on stockmarkets globally has crumbled in recent years (see chart). That has made private markets the most exciting corner of the investing universe, with trillions of dollars flowing into private equity (PE), venture capital and private debt. Private assets under management, which also include infrastructure and property funds, have surged to $24trn, from $10trn a decade ago. Now private-markets firms are dreaming of getting even bigger—by luring in the investing masses. Marc Rowan, who runs Apollo, a private-credit giant, says the savings of ordinary Americans are his company's biggest opportunity. Larry Fink, the boss of BlackRock, the world's largest asset manager, focused his latest missive to shareholders on the subject. New products aimed at a broader cohort of investors are multiplying. This 'democratisation" could benefit millions of investors. But, because private assets are less liquid, more opaque and much less regulated than their listed peers, it also creates new risks. There are good reasons why private assets have long been the preserve of a select few. At its inception, the typical private-equity fund secures commitments from a small club of pension schemes, endowments and other institutions to provide a sum of capital, usually in the tens of millions of dollars. The money is then called on in instalments whenever the fund's manager finds a company to buy. At the end of the fund's life, which can extend to a decade or more, the manager sells or floats the company before returning money to investors. Such conditions are a poor fit for the mass market. Smaller investors are less likely to tolerate the unpredictability of cashflows coming out and back. They are also ill-equipped to handle the mountains of paperwork managers would send their way. Those wanting their money back before the end of the fund's life—in the event of a stockmarket correction, for instance—cannot easily sell their stakes. Enforcing capital calls on legions of individuals would also be impractical. But pioneering products have arrived. In 2017 Blackstone's Real Estate Income Trust (BREIT) was launched to invest in property, which is typically unlisted. The fund has a minimum buy-in of $2,500, a 'perpetual" lifespan and monthly windows during which investors can sell out. BREIT limits the total amount of shares it will repurchase from investors to 5% of its net asset value (NAV) in any quarter. It has boomed in size, to a NAV of $54bn. The Blackstone Private Credit Fund (BCRED), launched in 2021, has done the same for private debt. It is the largest of a growing array of vehicles, dubbed business development companies (BDCs), offering retail investors exposure to private investments. On April 29th Capital Group, an investment firm, and KKR, a private-markets giant, jointly launched two funds blending public and private assets. The vehicles will have a minimum investment of $1,000 and annual fees below 0.9%, much lower than most private funds. Such products 'only scratch the surface of what we can offer", say the sponsors. Assets held by BDCs have more than tripled over the past five years, to $438bn at the end of December. Barbarians at the garden gate Whether such products fly or flop depends on their ability to solve three problems. First is the murky nature of the assets themselves. Public data on private markets are scarce. Whatever are available are hard to interpret. Firms are often accused of massaging the valuations of their holdings to flatter returns. The measures they use are hard to compare with public-market benchmarks. Sporadic reporting allows them to smooth out bad periods. There has been some progress. Last year MSCI, an index provider, unveiled private-market benchmarks that crunch the cashflow data for 14,000 funds since their inception. The new benchmarks also track funds' performance using figures gathered from investors. These should allow funds to be more rigorously compared with other offerings. Another barrier to democratisation is law and regulation. Private-markets firms eye America's vast retirement system. Huge defined-benefit pension schemes, such as the California Public Employees' Retirement System (CalPERS), have invested heavily in private markets for decades. But individually managed retirement accounts, and defined-contribution 401(k) schemes run by employers, which together hold $26trn in assets, have almost no exposure to private markets. A law from 1974, which spells out pension-plan providers' fiduciary duties, makes it possible they could be sued if they invest in private assets because of their lower liquidity and the high fees charged by fund managers. Here too, change may come soon. Daniel Aronowitz, Mr Trump's nominee to run the Employee Benefits Security Administration at the Department of Labour, has complained about frivolous lawsuits against corporate-pension providers. In 2023 Mr Aronowitz called some criticisms of pe in pension portfolios 'naive and uninformed," noting that exposure could offer both diversification and returns. With narrow Republican majorities in both houses of Congress, private-fund managers are hopeful that they will finally get their foot in the door. The most fundamental difficulty is that private assets are largely illiquid. Whereas stocks and bonds are traded all day long, stakes in private funds change hands only very rarely. Would-be buyers are scarce; working out a price is hard. Transactions, when they do happen, are not public so history can hardly serve as a guide. All this means retail investors cannot simply pile in and out of private assets at will, as they might with other parts of their portfolios. This is a problem new products are finding hard to solve. In November 2022, amid market ructions, many investors in BREIT tried to withdraw their money. The trust could return only 43% of the capital it was asked for; more than a year later it was still limiting withdrawals. Private-equity products could face even bigger liquidity problems, notes Jerry Pascucci of UBS, a bank. Whereas credit and property generate steady streams of cash, equity funds must keep a hefty cash balance or draw on loans, both of which reduce returns, if they are to permit regular withdrawals. To offer punters more liquidity, a few firms have started to offer exchange-traded funds (ETFs) containing private assets. The first was launched jointly in February by Apollo and State Street Global Advisers, a giant ETF provider, with the ticker PRIV. To ensure the minute-by-minute liquidity an ETF requires, however, the fund's private holdings will normally be limited to 35% of its total assets. Its largest holdings currently are mortgage-backed securities and Treasury bonds, which are very liquid. The idea of a liquid vehicle for private assets comes with its own problems. When investors want to transact shares in an ETF, the fund manager must buy or sell shares in the underlying assets to match the changing exposure. Were investors to want to sell their stakes in large volumes, the ETF managers may struggle to find buyers for the illiquid equity and debt inside them. That could cause the funds to seize up. The Securities and Exchange Commission has expressed concerns that priv may not be sufficiently liquid and could struggle to comply with valuation rules. Its warnings appear to have deterred rival firms from launching copycat products. For a long time the democratisation of private markets, though much talked about, remained elusive. Now at last the winds of financial innovation and regulatory change are blowing in the right direction. But as they entice more retail savers, private-fund managers will come under greater scrutiny. Working around the illiquidity of the asset class is hard, and it may even be dangerous to try. In the event that new products disappoint or trap people's savings, a backlash could ensue. The potential prize is huge. But catering for the investing masses is a risky business, too. For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter.
CNBC
26-06-2025
- Business
- CNBC
U.S. is still 'exceptional' despite rest of world outperformance this year, Apollo's Marc Rowan says
The U.S. stock market is underperforming the rest of the world this year but that doesn't mean American exceptionalism is dead, according to Apollo Global CEO Marc Rowan. The S & P 500 is a little more than 4% higher in 2025, underperforming other overseas markets that have surged this year as investors diversifed away from the U.S. The iShares MSCI ACWI ex US exchange-traded fund (ACWX) has rallied almost 17% year to date. Individual stock exchanges have performed even better. German stocks have soared more than 30% this year. China stocks are up more than 18%. But the U.S. is far from unattractive, Rowan said. Even with continued risks ranging from a ballooning fiscal deficit to geopolitical uncertainty, the U.S. stock market will continue to remain compelling to institutional investors, as it has for the last 15 years, the investor said. That's owing to the strength of the tech sector. "We were, as I sometimes say, hyper exceptional," Rowan told Morningstar CEO Kunal Kapoor on stage at the Morningstar Investment Conference in Chicago. "Ten stocks became 40% of the S & P, those 10 stocks were at a 60 P/E at one point. And one stock, Nvidia, that was greater than the market cap of every stock exchange other than Japan. That is hyper exceptional." "We are now moving to merely exceptional," Rowan added. "And so, on the margin, money will now flow to Europe and China, because the U.S. has made itself, on the margin, less attractive. That does not mean less attractive to Europe and China." .SPX YTD mountain S & P 500, year to date Indeed, on Thursday, the S & P 500 was on the cusp of an all-time high, less than 1% below its February peak, after clawing back all its losses following the tariff-induced April selloff. Tech stocks have led the way. Information technology and communication services are the top two S & P 500 sectors this quarter, rallying 21% and 15%, respectively. Within that universe, semiconductors have outperformed, with the VanEck Semiconductor ETF (SMH) up more than 30% over that time. Nvidia is up more than 40%. "You look at the world, the world has three big investment blocks. You can invest in China, you can invest in Europe. You can invest here," Rowan said. "I would rather be here." "We are just the cleanest dirty shirt," he said. "Every problem we have is worse in the other two regimes."
Mint
13-06-2025
- Business
- Mint
JPMorgan Can Retain Junior Bankers With Cash, Not Threats
(Bloomberg Opinion) -- Investment banks and private equity firms are fighting over the kids again. Both sides want the smartest graduates hungry to get rich (many have monster student debts, to be fair), but someone must put them through Wall Street Boot Camp, the basic training of financial modelling, pitching clients and selling deals. Banks typically bear those costs — and they're fed up of private equity free riding on their investments. Hoping for an informal code of honor between competing firms, or threatening dire consequences for junior analysts who don't play by some imagined set of rules won't fix the problem. A better solution would be to use the tool that governs everything else in finance: money. The issue has been around for years, but it seems to have gotten worse as private equity has grown and become greedier for Wall Street's human capital. Jamie Dimon, JPMorgan Chase & Co.'s chief executive officer, has been complaining about it more regularly and loudly in the past couple of years. Last week, the firm's global banking heads put a marker down by warning that it would sack juniors who sign contracts to jump to private equity as a second job when they've barely begun their analyst programs. This week, Apollo Global Management LLC CEO Marc Rowan held his hands up and admitted that Dimon had a point. Apollo promised to slow down on snagging commitments from youngsters too soon. There's huge competition within the industry to capture the best and hardest working juniors, echoing the battle among those recruits to land roles at the leading firms. JPMorgan, along with Goldmans Sachs Group Inc., tops the lists of most sought-after starter jobs year after year. The fact that these banks are still losing talent early shows just how lucrative working at private equity firms has become as the industry has gained scale and power. But that provokes an obvious question: Why aren't the likes of Apollo or Blackstone Inc. or KKR & Co. training more of their own graduates? Some of the biggest hedge funds or electronic market makers like Jane Street LLC are grabbing kids early and keeping them. For example, Citadel and Citadel Securities had more than 100,000 applicants for about 300 places across their summer intern programs this year — and the best of those will come back to junior roles and full careers. In Europe, private equity tends to still recruit from consultancy firms as well as banks, but in London and New York the fund houses almost exclusively want people who have been through investment bank analyst programs. That's despite the fact that the biggest private asset managers have their own in-house investment bank-type operations these days, doing capital markets and advisory work for portfolio companies. However, those may be too small and regarded internally as too much of a cost center to be suitable for polishing up raw recruits. The question facing banks, then, is how better to defend their investments in teaching Wall Street knowhow. To sack an individual who's planning to soak up the training and run, an employer bank needs to find out that's what they're planning; unless bosses think they can start monitoring private communications, I'm not sure that's feasible. Banks could try relying on private equity to start acting more honorably and only target analysts who are deep into their second year, or after. That probably won't work either. Each firm is competing with others to snap people up, which is how this kind of recruiting started happening earlier and earlier in the first place, as my colleague Matt Levine has noted. What banks really want is to get a decent return on the investment in human capital they're making. They could do more of what they typically do for all their bankers, which is to defer rewards: Pay analysts less salary upfront but with guaranteed loyalty bonuses six months, a year or 18 months after the training program is done. The best banks will still attract top graduates even if lesser rivals pay higher starting salaries — but I bet the industry would converge on more strung out compensation anyway. The losers would be those analysts who don't make the cut and so work the horrid hours for less money. Another alternative would be something like the model used in professional European football, which has rules around very young players to determine how much a buying club should pay to a team that developed their talents over their teenage years. This wouldn't work the same way in investment banking; but firms could insert some training cost into employment contracts that quick-quitting juniors would have to pay back if they move straight to private equity or even join a Wall Street rival. That would probably end up being paid as a signing-on fee by the firm keen to hire the analyst — but at least the first bank would recoup something. It would also send an important message. The problem isn't so much about churn, it's about investment and commitment between firms and bankers in both directions. Adding monetary friction for poaching younger talent could make the hiring firm and the analyst think twice about the costs involved in jumping early and the risks of getting the move wrong. More from Bloomberg Opinion: This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times. More stories like this are available on
