New research from Ocorian, a leading US and global asset services provider, shows that private equity fund managers are increasingly focusing on hybrid and evergreen structured funds for new launches as they target new distribution channels (please see the attached press release).
The study, carried out across the US and Europe amongst private equity fund managers overseeing $3.511 trillion, found that 63 per cent expect hybrid or perpetual structures with gates to dominate new launches over the next two years, whilst 56 per cent expect to see the highest number of new launches in evergreen or open-ended funds.
Semi-liquid funds are likely to be less popular, with just 40 per cent expecting to see the most new launches, whilst 25 per cent point to bespoke mandates and just 10 per cent to closed-ended drawdown vehicles.
The main reason behind changes to fund structures is access to new distribution channels, such as wealth managers, with nearly half (47 per cent) citing this as their motivation, ahead of the 41 per cent who cited regulatory or tax considerations, according to research carried out across all key US markets and in the UK, Switzerland, Germany, Italy, Spain, Poland, Sweden and Bulgaria.
All (100%) of the private equity fund managers surveyed said they are adapting their fee structures across their product range. Over a third (37%) are now relying more heavily on performance-based fee structures, and a similar proportion (35%) are charging tiered fees based on commitment size. Around a quarter (24%) have adapted their fee structures to offer a more bespoke arrangement for each investor. Just 4% state that they are reducing their headline management fees.
Around six in ten (58 per cent) expect to raise more capital from wealth managers and private banks over the next two years, whilst 63 per cent expect an increase in capital raised from family offices.
However, the largest source of new capital is likely to be pension funds, with 86 per cent expecting an increase in capital raised from this sector, whilst 80 per cent expect an increase from insurance companies and 84 per cent from sovereign wealth funds.
Around 50 per cent of private equity fund managers surveyed reported that average investor commitments had increased over the past two years, whilst the remainder said that commitments had remained broadly stable.
Almost all (92%) said the liquidity profile of their newer products had improved, albeit modestly, with just 4% stating that products were significantly more liquid than five years ago. Growing interest in the tokenisation of funds may have played a part, with 70% of managers stating that they were exploring the concept or actively pursuing it.
