Evergreen funds prime for retail PE investors

During a panel session at the act Conference 2024 yesterday, private equity experts spoke of the growing appeal of evergreen funds as a vehicle for retail investors looking to invest in private markets.

Unlike traditional private funds, evergreen funds provide investors instant access to capital and monthly liquidities. It also significantly lowers the investor's requirements for access.

"Traditionally, it's been very difficult for investors in the private wealth space to qualify for private equity investments," Partners Group head of private equity business unit Toby Mannock said.

"Equally, it's being locked up for long periods of time, that often doesn't suit investors. The qualification, the lock-up period, and the pricing, locked in 10-year funds, it's very difficult to know how they're performing year to year."

But evergreen funds, which offer more flexibility, are gaining traction.

Touching on what retail investors can expect from evergreen funds, Gavin Williams, senior vice president at Neuberger Berman, said they will receive the same "quality" of investment.

"Even though the [retail] fund is smaller, it doesn't have any detrimental effect on the quality of the institutional-grade investment that is going into the fund," Williams said.

Echoing Williams' statement, Mannock said that, like Neuberger Berman's strategy, Partners Group uses a "pro rata allocation" policy to give investors the "same access to the same opportunities."

On the business front, Mannock said Partners Group's evergreen fund has grown "significantly", currently making up 30% of Partners Group's total assets under management, saying the investment vehicle is suitable to all kinds of investors.

Despite clear advantages, Mannock advised critical factors can influence the private market and sees a "mismatch" in investment approaches.

"I think you will see a portfolio adjust over time... we are still in that point in the cycle where I think private markets assets are adjusting to a higher interest rate environment," Mannock said.

"There is a mismatch between those who are holding onto assets from a previous higher interest rate and those who are willing to buy new assets in a current low higher interest rate environment, trade environment, and I think that mismatch is still working its way through the system."