Hi all,
I have an interview with a team that is launching a new Evergreen fund (a first for the group) that will invest in profitable private companies. I've read about the popularity of these over the last 5 years, but have never read through a PPM for one so have no idea what the typical economics or terms are. Not sure if they'll expect me to know the terms of their upcoming fund which they are currently raising the initial capital for, however, I'd like to be somewhat knowledgable about what terms are typical with these types of funds going into the intereview.
Based on my conversations with friends/colleagues, I've come up with the following - please feel free to confirm, disagree with any of the below:
Mgmt Fee: 1% to 2% of net asset value (NAV) (or committted capital?) per year.
Carry: 10% to 20% of profits above 8% annual hurdle rate. Some funds also utilize a high-water mark - not sure how this works.
Subscription: 1-2% one time subscription fee. What is the rational for this and what do these fees cover?
Redemption Fee: 1% to 5% if an investor redeems before 5 years
Operational expenses: Admin, legal, accountin and other operational costs passed onto LPs. Might be capped at 1% of NAV or committed capital per year.
Based on the most helpful WSO content, here are the typical economics and terms for Evergreen Funds:
These terms are designed to align the interests of the fund managers with those of the investors, ensuring that the fund operates efficiently and profitably over the long term.
Sources: What Happens when a PE Fund Closes?, Evergreen Funds/Permanent Equity, Difference between REPE, GP, LP, debt fund?, Q&A: Non-Target School to Portfolio Manager at a Top Hedge Fund – 6 Years Out of Undergrad, Overview of Infrastructure Private Equity
All of the PPM/Documents are listed on the respective vehicles websites, fyi
This fund is still in fundraising mode so docs aren’t finalized yet or available - at least to me.
I was under impression you can’t just go to, say KKRs site and download their PPMs for their finds. Aren’t they (the gp or investment manager) required to only provide the PPM to accredited investors? No way to verify that if they are made public.
I meant for all other funds currently in the market.
As an example just go to Stepstones website and look through their Private Markets Fund offering documents. Its all there.
Bump. Also interested.
Goldman Research has put out a ton of great info on this - if you have access, you should take a look at their reports on the "State of Retail Alternatives"
Can't find. Pls link
Economics depends on the size/aum/calibre of the sponsor and the underlying strategy (buyout/secondaries/credit).
A lot of the co-investments/secondaries evergreens don't charge carry, just a 1.75% mgmt fee on NAV
Coller Capital has a secondaries only retail vehicle that charges 1.65% of NAV, no carry, no upfront fee, and a 2% redemption fee if you try and redeem within 1 yr of buying. Those are dirt cheap economics.
What’s the thought process around not charging carry?
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