Key Takeaways
- • Partners Group plans to restructure its Luxembourg-domiciled evergreen private equity fund, Global Value SICAV, into an umbrella structure with two sub-funds, a proposal due to be put to shareholders the following week.
- • Roughly one quarter of assets, the younger and higher-performing portfolio, would move into a "compounding fund" targeting new investments, while the remaining three quarters would go into a "distributing fund" aimed at returning capital to investors.
- • Redemption caps at both sub-funds would be reduced to 2.5 per cent, with plans to later restore the 5 per cent limit for the compounding fund, according to Bloomberg.
- • The distributing fund would see a management fee reduction of at least 25 bps and carry assets over at existing valuations, per a person familiar with the matter cited by Private Equity Wire.
- • Commentators warn the structure does not solve the underlying liquidity problem and could raise valuation concerns, as up to 75% of assets would sit in a run-off vehicle.
Summary
Partners Group is using an umbrella structure to address elevated redemptions at Global Value SICAV, its Luxembourg-domiciled evergreen private equity fund. The firm announced the plan in October, and the proposal was due to go to shareholders the following week. Under the restructuring, the fund's assets would be split by vintage: one quarter, the younger and higher-performing assets, would move into a compounding fund targeting new investments, while the remaining three quarters, which are older and weaker-performing, would move into a distributing fund seeking to return capital to investors.
The structure is designed to protect value for both continuing and new investors. Assets in the compounding fund are shielded from being sold to meet redemptions in the distributing fund, reducing the risk of a fire sale of top assets. Renaud Oury, Luxembourg regional head at Apex Group, said this "can be fairer for both sides," as continuing investors are less exposed to forced-sale costs and new investors do not automatically inherit legacy exposures. Partners Group has said it has received positive feedback from distribution partners and clients in Europe and globally, and that the approach could serve as a blueprint for the industry.
The fund's difficulties stem partly from a portfolio heavily weighted toward highly valued 2021 and 2022 investments, alongside competitive pressure from new entrants to the evergreen market. According to Bloomberg, the redemption cap at both sub-funds will fall to 2.5 per cent, with the 5 per cent limit to be reinstated for the compounding fund later. A person familiar with the matter told Private Equity Wire that the distributing fund's management fee will drop by at least 25 bps and that assets will carry over at existing valuations.
Skeptics raise several concerns. EDHEC analyst Evan Clark argues that investors must now weigh the possibility that a significant portion of their capital moves into a run-off portfolio with uncertain realisation timing, and that continued fees may not be justified for a vehicle not making new investments. He also warns that the book could be mis-marked, since assets sold or valued by buyers may fall below NAV. Debevoise & Plimpton partner Veronica Aroutiunian notes that communicating such changes to retail investors through multiple intermediaries is more complex than in institutional funds, and that the firm's US flagship fund recently capped redemptions at 5 per cent after receiving $2.2bn in requests, equal to 15 per cent of net assets. Oury summarised the core limitation: "A sub-fund does not solve a liquidity problem by itself."
The structure is designed to protect value for both continuing and new investors. Assets in the compounding fund are shielded from being sold to meet redemptions in the distributing fund, reducing the risk of a fire sale of top assets. Renaud Oury, Luxembourg regional head at Apex Group, said this "can be fairer for both sides," as continuing investors are less exposed to forced-sale costs and new investors do not automatically inherit legacy exposures. Partners Group has said it has received positive feedback from distribution partners and clients in Europe and globally, and that the approach could serve as a blueprint for the industry.
The fund's difficulties stem partly from a portfolio heavily weighted toward highly valued 2021 and 2022 investments, alongside competitive pressure from new entrants to the evergreen market. According to Bloomberg, the redemption cap at both sub-funds will fall to 2.5 per cent, with the 5 per cent limit to be reinstated for the compounding fund later. A person familiar with the matter told Private Equity Wire that the distributing fund's management fee will drop by at least 25 bps and that assets will carry over at existing valuations.
Skeptics raise several concerns. EDHEC analyst Evan Clark argues that investors must now weigh the possibility that a significant portion of their capital moves into a run-off portfolio with uncertain realisation timing, and that continued fees may not be justified for a vehicle not making new investments. He also warns that the book could be mis-marked, since assets sold or valued by buyers may fall below NAV. Debevoise & Plimpton partner Veronica Aroutiunian notes that communicating such changes to retail investors through multiple intermediaries is more complex than in institutional funds, and that the firm's US flagship fund recently capped redemptions at 5 per cent after receiving $2.2bn in requests, equal to 15 per cent of net assets. Oury summarised the core limitation: "A sub-fund does not solve a liquidity problem by itself."
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