Sixteen semi-liquid private funds run by groups including Blackstone, Blue Owl, Apollo and KKR generated more than $2bn in servicing fees for wealth advisers since 2017, an FT analysis of regulatory filings found.
The filings show how large brokerages and banks, including Morgan Stanley, UBS and Bank of America Merrill Lynch, as well as independent wealth managers, benefited from the boom.
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So-called evergreen vehicles, which typically let investors add and withdraw money at set intervals, gained traction over the past five years amid strong markets and diversification demand.
The FT said these structures also created predictable fee income streams for both private capital groups and the advisers distributing their products to individual investors.
More recently, some funds have moved into net outflows amid questions about valuations and underwriting, with investors seeking to withdraw more than $20bn from private credit in Q1.
“The advisers themselves are stuck in this incentive structure where their behaviour is going to be aligned with pushing clients into these products,” Shang Chou, the co-founder of the multi-family office Dishmi Capital told the FT.
“It’s not a surprise that this stuff has been over-allocated to the retail investor base.”
Blackstone paid the most in servicing fees and commissions in the FT’s review.
Its property fund Breit and lending vehicle Bcred have attracted more than $100bn in combined net assets since 2020.
Disclosures showed the two funds paid a total of $280m in servicing fees to brokers last year, highlighting the scale of ongoing payments tied to distribution channels.
Breit also raised its fee cap, increasing the limit from 8.75% of the fund’s gross capital raised to 10%. The change keeps room for higher payments over time.
As scrutiny of private credit has risen, some on Wall Street have blamed distribution incentives for helping push wealthy clients into the products, accelerating growth across the category.
“Of course they’re incentivised by these fees,” said Bob Elliott, co-founder of Unlimited Funds, referring to advisers at big brokerages, also known as wire-houses.
“Any person who has a wire-house adviser knows that they’re constantly being pushed products that are financially [beneficial] for either the adviser or the wire-house,” Elliott said.
Breit has paid brokerages’ wealth advisers more than $500m in total commissions, according to the FT analysis. Other large private capital groups pay similar rates, filings show.
The filings also point to performance differences between fee tiers, with higher-fee share classes typically producing lower returns than comparable versions carrying lower charges.
Blackstone’s lowest-fee Breit share class has delivered an annual return above 9.3% since 2017, while Bcred has returned 9.5% in total since its 2021 launch.
That compares with higher-fee share classes showing annual net returns of 8% for Breit and 7.8% for Bcred, according to the FT’s review of disclosures.
At Blue Owl and Ares, the gap between the highest- and lowest-fee vehicles has been at least as large since inception, based on the filings cited.
“Our true north remains delivering superior net returns to our end investors, and that is exactly what we’ve done,” Blackstone said, responding to the findings.
The firm added its property and credit funds outperformed publicly traded benchmarks by about 60% since inception, and said most evergreen assets were in no-fee share classes.
Banks told the FT their advisers were bound by fiduciary obligations and were not incentivised by fees. Morgan Stanley chief executive Ted Pick also pointed to limited exposure.
Pick said alternatives were 5% of the financial advisory business’s total assets. The bank said it negotiated lower total fees and had “harmonised our fee structure”.
