Great Gray rents the diligence half of its private markets CITs

Great Gray Group has agreed to build private markets collective investment trusts with iCapital, splitting the work so Great Gray Trust Co. establishes the CITs, serves as trustee, holds fiduciary authority over investments and oversees servicing, while iCapital becomes what the two firms call a “preferred partnership” for private markets manager evaluation, due diligence and portfolio construction. PlanAdviser and PlanSponsor both carried the announcement. The suite will be asset-class-specific: private equity, private credit and private real assets are the intended sleeves, and liquidity management, manager selection, portfolio construction and ongoing oversight are among the capabilities built into the vehicles.

The deal arrives in a crowded stretch of the year: Constitution Capital Partners launched a private equity CIT on September 1; Principal Financial Group said on August 26 it would extend its Preferred Partners Program into private markets and develop a CIT series for the first quarter of 2027; SEI Investments and WTW announced an August partnership to develop private market funds available through CITs; Voya launched two multi-manager alternative CITs in June, and PGIM brought a private credit CIT in May. Six private markets shelves aimed at the same plan sponsors in roughly five months is a race for position ahead of the first committee mandates, and it implies the wrappers themselves will compress into undifferentiated plumbing wrapped around a much smaller roster of managers.

What Great Gray kept is the more revealing half of the split. The company bought the investment layer before, announcing last November the purchase of CIT fund sub-advisory business assets from flexPATH Strategies and taking over investment management of assets it had served as trustee for since those trusts were created more than a decade earlier. This time it holds the trustee and servicing seats and rents diligence from a firm whose own business is diligence, because standing up a private markets manager-research bench means years of hiring before revenue arrives and the output is difficult to sell on its own. Renting it turns a fixed cost into a partnership and leaves Great Gray selling what a trust company sells: fiduciary standing, administration and access.

In the announcement, Great Gray president and CEO Rob Barnett said the firm wanted to partner with an industry leader as private markets begin to play a larger role in diversified defined contribution portfolios, and selected iCapital for its promise to help educate advisers, who in turn educate plan sponsors about the need for private markets in retirement. iCapital chair and CIO Lawrence Calcano described education as a cornerstone of the investments his firm has made to help advisers help plan sponsors make the right decisions, and said that “before you even get to the underlying clients, participants, advisers need to be well-educated.”

Both men are describing the same bottleneck. If the gate on private markets in defined contribution is adviser and committee education, the manager roster is not the moat; the distribution and education channel is, and firms that have been seeding it for a decade will convert faster than firms with sharper diligence and no relationships. Barnett's rationale for choosing iCapital points the same way: he picked the partner he believes can move the people who actually make the decision.

Asset-class-specific construction hints at what the two firms think they are selling. As this publication has argued, CITs now hold 55% of the $5.3 trillion target-date market, and the QDIA has become a pipeline asset, where control of the sleeve means control of the contribution flow. Single-asset-class trusts read as components, the raw material for a custom allocation a sponsor assembles or an alternatives sleeve a target-date manager wraps; Voya's multi-manager alternative CITs and Principal's expansion point the same direction. The phrase “asset-class-specific” invites the inference, and it is the better bet: a finished private markets product has to win a QDIA search while a component only has to win a line on a page.

The firms call iCapital a “preferred partnership” for manager evaluation and due diligence, which ranks the platform rather than locking the shelf, and the announcement does not address whether other diligence providers can be added to the same trusts. More consequential is where fiduciary authority sits: Great Gray maintains it over investments in the trusts even though the research feeding those investments comes from iCapital. Great Gray has arranged to hold the call while someone else does the homework, a fast way to launch a shelf and a harder structure to explain if a plan committee asks who is accountable for manager selection.

Liquidity management earns its place in the capability list because private equity and real assets are the hardest assets to place in a lineup participants can move, and supply of these vehicles is now arriving faster than demonstrated demand for them. Constitution Capital's September 1 launch came with $50 million in assets, a useful reminder that the first sleeves in this race are small and that an announced vehicle is not yet a strategy.

Funded assets, not announcements, are the next thing to watch. Principal has dated its CIT series to the first quarter of 2027; Great Gray and iCapital have not dated theirs. If mandates show up in these sleeves before Principal's launch, vehicle supply was the binding constraint and the market has just relieved it. A quiet year would mean the field has built a great deal of shelf space for a committee conversation that has not started.