UBS is entering into a tie-up with Switzerland's Partners Group, the bank said on Friday, in a move to give its clients access to lucrative private markets normally accessible by only the wealthiest investors.
The partnership will broaden access to the fast-growing investment niche, allowing UBS clients with more than 20,000 euros ($23,650) to invest as they seek yield in a volatile, low-interest rate environment.
Private markets - or investments into companies not traded publicly on stock exchanges - have been one of the highest-returning asset classes in recent years.
But the illiquid market, where it can be difficult to quickly pull out cash or assess valuations, is generally seen as most suitable to long-term investments by institutional investors like pension funds or the very richest families.
"This is about extending the drive for UBS to make more private markets products available to its clients. It has been a big growth area for UBS for the last three years and it remains very important," Jake Elmhirst, UBS's head of private markets content in its wealth management division, told Reuters.
"When you are in a negative interest rate environment clients need to find ways to generate returns and to diversify their portfolios."
UBS aimed to attract $1 billion-$3 billion in new annual private market investments through the partnership, he said.
Under the arrangement, Partners Group, which manages just under $100 billion in global private markets investments, will carve out a portion of its private equity deal flow specifically for UBS clients.
UBS clients across Europe and Asia will then have access to private equity buyouts and other co-investments through an aggregating vehicle, to be launched in the first half of 2021.
"For a typical buyout fund you would need to be investing north of $100 million to be considered as a credible co-investor," Elmhirst said.
The minimum investment for UBS clients in such vehicles would likely be around 100,000 euros.
UBS retail clients across Europe will also have access to a broader long-term investment fund run by Partners Group, which provides exposure to 30-60 private investments, Partners Group co-founder Urs Wietlisbach said.
The minimum investment for this fund would be about 20,000 euros. Investments were likely to generate low-double-digit net annual returns.
"We believe that investing in private markets is a megatrend that is likely to continue, and Partners Group is one of the leading companies in this area," Vontobel analyst Andreas Venditti said in a note, adding that the deal solidified Vontobel's "buy" rating on UBS and 1,020 franc target price for Partners Group shares.