Partners Group has launched a private equity-focused evergreen European Long-Term Investment Fund as it seeks to draw more individual investors to the private markets.
Partners Group Private Equity Evergreen is the first ELTIF-compliant vehicle of its kind, according to a Tuesday statement. This marks Partners Group’s fifth ELTIF-compliant vehicle, having been among the pioneers of these structures with its debut offering in 2017.
Individual investors with a minimum investment of €10,000 or $10,000 can participate in the offering via Partners Group’s distribution partners across markets in Europe, including Germany, France, Spain, Italy and the Benelux regions, among others, per the statement.
It is unclear how much the Swiss-headquartered firm is targeting for the vehicle. Up to 80 percent of capital raised for the vehicle will target direct investments, with the remainder targeting primaries and secondaries investments, Private Equity International understands.
“Our PE Evergreen ELTIF does not have settlement limitations as seen in closed-ended funds,” Markus Pimpl, managing director for client Solutions, EMEA at Partners Group, told PEI. “This means the settlement of our fund can be done almost like a UCITs fund. You subscribe, you redeem on NAV, you can go in and out, you can take the traditional routing via Euroclear and Clearstream. This is where the manual work kicks in for a closed-ended fund. This is what we don’t have for our evergreen vehicle.”
The EU’s revised regulation, ELTIF 2.0, came into force early this year and allows open-end features and more flexibility in terms of the scope of eligible assets. It also introduces fund of funds strategies and extended borrowing rules, among others.
Investors in the PE Evergreen ELTIF will benefit from typical evergreen or semi-liquid features, while the ELTIF structure provides an additional layer of investor protection and simplified administration, the firm noted in a statement. Liquidity for the fund is monthly, Pimpl noted, with gates imposed if those redemptions exceed a predefined amount.
“Individual investors in the fund, including retail clients that are not considered professional investors, will invest strictly in parallel with institutional investors, gaining access to the same investment content through Partners Group’s pro rata allocation policy,” the statement said.
Capital will be invested under Partners Group’s PE strategy, which is focused on four industry verticals: technology; health and life; goods and product; and services.
Pimpl said the firm abstains from using the term “semi-liquid” to describe its products. “If you use ‘semi-liquid’ funds when marketing to private individuals or even institutional clients, often what sticks is the semi-liquid [concept]. We felt we want to give investors flexibility, in which they can redeem, to an extent, on a monthly basis. But at the end of the day, the underlying investment is illiquid. This is why we felt we need to be very careful and conscious when we communicate.”
Pimpl also said that the firm is careful when it comes to thematic ELTIF funds. “One of the biggest challenges if you have a thematic fund is that you are forced to invest the capital that you raise just into healthcare, for example, or just into Europe. We believe in diversification and would rather provide a private equity solution that follows our investment beliefs and industry trends that we focus on via a thematic sourcing approach.”
The ELTIF market is expected to scale up from €11.3 billion as of end-2022 to €50 billion by 2028, according to data from Scope Group.
Pimpl noted, however, that current ELTIFs raised in the market are generally in the hundreds of millions. “The reason why we see smaller fund sizes in ELTIFs is not because people are not interested. It’s still the operational issue that closed-end funds find in a traditional private wealth set-up, because the closed ended fund operations are still mostly done manually – so we are still not able to access a mass affluent base.”
While there have been developments over the last few years with fintech companies, it isn’t yet the industry norm, he added. “We won’t see the massive sums of capital raised for closed-end ELTIFs because from an operational point of view, distributors still struggle to scale to the extent they need to tap the mass affluent investor base.”
That said, he expects to see the more dynamism in the ELTIF market over the years, with more assets under management and more ELTIF providers. “Fund service providers have begun investing in digital fund operations, which will make it easier and scalable. The investment regime has also become more flexible, so I expect more to come.”