Private equity fund managers are increasingly focusing on hybrid and evergreen structured funds for new launches as they target new distribution channels, new research from Ocorian, a leading U.S. and global asset services provider, shows (please see the attached press release).
The study, carried out across the U.S. and Europe with private equity fund managers managing $3.511 trillion, found that 63% expect to see hybrid or perpetual structures with gates dominate new launches over the next two years, while 56% expect to see the most new launches in evergreen or open-ended funds.
Semi-liquid funds are likely to be less popular, with just 40% expecting to see the most new launches, while 25% point to bespoke mandates and just 10% to closed-ended drawdown vehicles.
The key reason driving changes to fund structures is access to new distribution channels, such as wealth managers, with nearly half (47%) citing that motivation, ahead of 41% pointing to regulatory or tax considerations, the research across all key U.S. markets and in the UK, Switzerland, Germany, Italy, Spain, Poland, Sweden and Bulgaria found.
All (100%) of the private equity fund managers surveyed said they are evolving fee structures across their product range. Over a third (37%) are now placing greater reliance on performance-based fee structures, and a similar number (35%) are charging tiered fees by commitment size. Around a quarter (24%) have evolved their fee structures to offer a more bespoke arrangement per investor. Just 4% cite that they’re lowering their headline management fees.
Around six out of 10 (58%) expect to increase capital raised from wealth managers and private banks over the next two years, while 63% expect a rise in capital raising from family offices.
However, the biggest source of new capital is likely to be pension funds, with 86% expecting an increase in capital raised from the sector, while 80% expect an increase from insurance companies and 84% from sovereign wealth funds.
Around 50% of private equity fund managers questioned reported that average investor commitments had increased in the past two years, with the rest saying commitments had remained broadly stable.
Almost all (92%) said the liquidity profile of their newer products had increased, albeit modestly, with just 4% saying products were significantly more liquid than five years ago. Increasing interest in tokenization of funds may have some influence with 70% of managers saying they were exploring the concept or actively pursuing it.
