Institutional investors are beginning to allocate capital to private market vehicles from Blackstone and KKR originally designed to give wealthy individuals access to private equity, credit and infrastructure, according to a report by the Financial Times.
Evergreen funds, which generally allow investors to access their capital at set intervals rather than committing it for the typical decade-long life of a private equity fund, have become an increasingly important part of asset managers’ efforts to expand into the wealth management market.
However, the structures are also attracting interest from pension funds, endowments and other large institutional investors, despite typically offering lower fees and potentially lower returns than traditional private market vehicles.
Blackstone’s wealth business has seen institutional investors begin allocating to its evergreen products, although they currently account for only a small proportion of the capital raised, according to Joan Solotar, the firm’s global head of private wealth solutions. She said institutional interest had increased over the past year and was likely to continue growing.
KKR has also responded to rising demand by introducing institutional share classes across a number of its evergreen strategies, including buyout, credit and infrastructure funds. Eric Mogelof, the firm’s global head of client solutions, said the move was intended to address growing institutional demand.
The development could have significant implications for the private markets industry, where asset managers are increasingly looking beyond traditional institutional investors to expand their investor base and generate more predictable fee revenues.
Listed private markets groups including Blackstone, KKR and Apollo have aggressively developed products for individual investors in recent years. At the same time, many institutional investors have become more cautious about making new commitments to traditional private equity as managers have struggled to exit investments and distribute proceeds.
Evergreen structures could offer institutions an alternative, providing greater flexibility over capital deployment and liquidity.
