Private asset funds are no longer fit-for-purpose

This article was published in partnership with Blue Owl Capital.

This article was published in partnership with Blue Owl Capital.

Asset owners are crying out for bespoke solutions to address their unique and evolving needs, yet many private market managers continue to squeeze them into generic closed-ended funds. Such structures are outdated and face extinction, according to James Clarke, global head of institutional capital at Blue Owl Capital.

When it comes to raising money, private market managers have had it relatively easy.

The culmination of multiple factors, including heightened economic and geopolitical uncertainty, rising inflation, shrinking public market opportunities, innovation in technology, and an under-allocation to private assets, have resulted in a fantastic decade for private market managers.

The global private market investment sector has surged to over US$24.4 trillion from around US$9.7 trillion in assets under management in 2012, according to EY Global, as asset owners have bolstered their allocations to private equity, private credit, and infrastructure in an effort to generate alpha and build more diversified, resilient portfolios.

And there’s more investment to come.

A recent survey of leading global limited partners (LPs) conducted by consultant McKinsey found that investors plan to allocate more capital to private markets in the near term.

However, the dynamics are changing, and managers need to wake up to the bespoke needs of their clients.

Fundraising across all private asset classes has become more challenging, with investors demanding greater value, flexibility and stronger alignment of interests.

At the same time, private market managers are grappling with fresh headwinds including competitive pressures, narrowing exit options, and heightened regulatory scrutiny.

McKinsey’s 2025 Global Private Markets Report described dealmaking conditions in more recent times as “tepid” and “likely to remain uneven”, as managers adapt to an industry in “transition.”

“Fundraisers are looking beyond closed-ended channels to raise capital in new vehicles, such as evergreen funds,” the report stated, adding that investors are moving away from passive allocations and seeking to invest directly or co-invest in assets alongside GPs, and actively engage companies.

This transition was inevitable.

Traditional closed-ended structures, which pool and lock money up for a fund’s lifecycle, are not optimal for many institutional investors, particularly large allocators.

Illiquidity aside, there’s little-to-no ability for investors to influence underlying investment and management decisions.

Additionally, there are question marks over whether client service is meeting the mark. And the level of service in general needs to improve, in my opinion.

Take it or leave it

Closed-ended funds are still the dominant vehicle for accessing private markets, but their generic, one-size-fits-all nature is hardly befitting of some of the world’s largest asset allocators.

Globally, institutional investors, including pension funds, sovereign wealth funds and endowments, manage an estimated US$58.5 trillion, according to the Thinking Ahead Institute’s Global Pension Assets Study. They are all different and unique, reflecting their membership, and they deserve to be treated that way.

Conversations with a Californian defined benefit fund will differ wildly to a UK defined contribution fund, highlighting the irrelevance of a single, one-dimensional solution for both.

Customisation should be table stakes, as it is with most other goods and services, from cars to legal advice and I would argue, institutional public market investments.

Private market managers have historically been largely immune. Ironically, it is their success and the growth of private market assets over the past decade that is driving change and progress.

Active listening and active management

Private market managers need to actively listen and respond to client demands for bespoke solutions that meet their specific circumstances, requirements and objectives.

They need to lift service standards significantly and innovate to reflect the fees that they earn, and the trusted, respected relationship that asset owners expect from their service providers.

If they don’t act swiftly, the trend suggests that more institutional investors will bring private assets inhouse.

Asset owners themselves are growing and maturing. They are reshaping their teams, expanding their investment capabilities, and expecting more from their partners.

Private market managers also need to evolve to better serve and cater to the needs of their clients. They can’t rely on traditional fund structures, given their limitations, or a drop in and out service mentality. Instead, they should build bespoke solutions that offer more control, flexibility, and optionality – approaching every client engagement as a true partnership.