Partners Group, the Swiss private equity firm, is restructuring its €6.6 billion European fund for wealthy individual investors amid rising withdrawal requests and weaker recent performance. The Zug-based firm announced plans to divide the fund into two separate portfolios: one comprising older, lower-performing assets, and another containing newer investments expected to yield higher returns.

The reorganization follows increasing pressure from clients seeking to redeem their shares in both the firm’s US and European funds. In response to these demands, Partners Group imposed a quarterly redemption cap of 5 percent on the fund in June, a limit that remains in place as outstanding requests continue to exceed it. Such "gating" measures are common in private equity funds to prevent forced asset sales at depressed prices, which could harm overall fund performance.

The new structure will transform the existing vehicle into an umbrella fund overseeing a "distributing" portfolio and a "compounding" portfolio. The distributing segment will hold older investments that have underperformed relative to recent adds, while the compounding portfolio will encompass newer holdings believed to have stronger growth potential. According to a person familiar with the matter, roughly 75 percent of investors’ exposure would be allocated to the distributing portfolio and 25 percent to the compounding one, reflecting the composition of the existing assets.

Investors will be allowed to reinvest proceeds generated from asset sales within the distributing fund into the compounding segment. The overall redemption limit of 5 percent would apply individually to both portfolios under the new arrangement.

Partners Group, a pioneer in offering private equity and private markets products to high-net-worth individuals, has faced growing competition from larger US-based firms such as Blackstone and KKR in recent years. The private equity sector as a whole has encountered challenges in exiting older investments made during periods of low interest rates and high valuations, impairing the ability to generate strong returns on those assets.

The firm is reportedly considering similar restructuring moves for its other evergreen strategies targeting wealthy clients. The proposed changes to the European fund are subject to shareholder approval.