Voima Weekly #11 – Not everything that glitters is gold

Photo made with GPT.

In Weekly #4 I wrote about the domestic asset management sector’s rush into the housing market. The story was easy to sell: “real estate is always valuable.” The lowest interest rates in human history combined with high fee levels made it an attractive business – and so the herd went on to launch one residential fund after another. Now most of them are closed, the money is locked in, and the market is frozen. A quick look at household purchasing power, its outlook, and the GDP trend should have raised the question: where exactly is the purchasing power
supposed to come from to buy homes at ever-higher prices?

Now the rush has shifted to private equity funds – more specifically, to feeder funds into international PE houses. This is not about Finnish teams scouting for promising growth companies locally, but about asset managers building feeder structures for foreign firms. The story is once again appealing: “higher returns” than from listed equities. The model is simple: pool investors’ money, funnel it onward, and invest in unlisted companies, aiming to buy cheaper, lever up, streamline, and sell at higher valuations – with the money effectively locked
up for ten years.

Since the early 2000s, the PE asset class has delivered solid returns – but the past few years have told a different story: returns have lagged behind the stock market, deals are scarce, and the best portfolio companies are sold only to large buyers. Those companies for which no buyers are found end up, in practice, in retail investors’ “evergreen parties” – as Fundco’s recent piece aptly put it.¹ This is an obvious continuation of domestic real estate funds: in both cases, fees are high, investments are illiquid, and the temptation is to sell a good-sounding story.

The asset management sector has consolidated and listed on the stock market, and to sustain share price performance it craves more profitable growth – which drives further consolidation. The new feeder funds may not necessarily attract much fresh capital, but the management fees and other charges are far higher than in plain equity funds. That makes it an attractive business for asset managers. For small retail investors, however, it means becoming a source of liquidity for large funds – the tracksuit crowd gets turned into buyers when no one else is left. Much the same happened with residential funds.

The mothers of the world’s most populous country, India, have achieved remarkable returns simply by wearing jewelry on their hands and around their necks. The annualized return (CAGR) of gold in Indian rupees from December 1999 to September 2025 has been about 13.6% per year – more than the average hedge fund manager. If those same mothers had used 50% leverage at an annual borrowing cost of around 4.9%, their return would have risen to 16.4% per year.² In practice, that’s at least on par with many private equity managers – but without closed-end funds, with daily liquidity, and conveniently carried as gold jewelry. Gold sets the bar high – and most fall short.

–Marko Viinikka
Founder, CEO
Voima Gold Oy

1 FundCo, in its article “Tarjolla tänään: evergreenbileet,” writes about how the new evergreen products aim to democratize private equity investing, yet carry significant liquidity and cost risks. For those interested, Inderes’ Sauli Vilén and FundCo’s Saku Sairanen discuss the dynamics of private equity in the podcast: “Private equity investing, guest Saku Sairanen | inderesPodi 239.” All in Finnish.

2 Source: goldprice.org. Converted into euros: Gold return 10 Jan 2000 – 25 Sep 2025 Without leverage: CAGR ≈ 10.1% per year. With 50% leverage, 4.9% borrowing cost: CAGR ≈ 12.4% per year

Disclaimer: Voima Weeklies are the personal writings of the undersigned. They do not necessarily represent the official view of Voima Gold Oy or any other company, nor do they constitute investment advice or a recommendation to purchase securities.