Can umbrella funds keep evergreens dry?
Faced with elevated redemptions, Partners Group is using an umbrella structure to try to solve its evergreen fund’s liquidity challenges. Key questions remain before it’s likely to have any followers. By Jack Arrowsmith, London Liquidity pressure is very hard to escape. Quarter after quarter, semi-liquid funds have been hit with redemption requests. For most, the response has been to impose a cap…
Partners Group is exploring an umbrella structure to address liquidity challenges faced by its Luxembourg-domiciled evergreen private equity fund, Global Value SICAV. This innovative approach aims to separate the fund's assets into two sub-funds: a compounding fund for younger, higher-performing assets, and a distributing fund for older, weaker-performing assets.
The compounding fund will focus on new investments, while the distributing fund will seek to return capital to investors. To manage redemptions, the firm plans to reduce the cap to 2.5 percent for both funds, resuming the previous 5 percent limit for the compounding fund.
The evergreen fund's predicament stems from a portfolio heavily invested in 2021/22 high-valued assets, coupled with increased competition from new entrants in the market. This has led to a vicious cycle of liquidity demands, making it difficult to preserve NAV and attracting new subscribers.
By implementing an umbrella structure, Partners Group aims to safeguard its top-performing assets and provide a fairer distribution of capital. However, the proposal faces challenges, including potential concerns from new investors regarding the fund's long-term strategy and the possibility of a valuation correction due to inflated asset prices. Additionally, communicating these changes to a retail audience presents complexity, as the message must traverse multiple intermediaries, heightening the risk of misunderstandings.
Written by urgent.news from Private Equity Wire's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
- Can umbrella funds keep evergreens dry? privateequitywire.co.uk