Portfolio managers can use semi-liquid funds to extend their holding times in companies and manage the needs of different client segments, a Funds Europe private markets panel heard recently.
In recent years, the private markets industry has put more emphasis on providing liquidity, including through secondary markets where investors can exit their investments sooner than planned.
This is particularly the case through semi-liquid – or “evergreen” – fund structures – namely the Long-term Asset Fund (LTAF) in the UK, and the EU’s European Long-term Investment Fund (Eltif).
Regulators created these structures to try and facilitate diversification into private markets for investors, as well as increase funding opportunities for smaller, non-listed companies.
Both structures – which have a precedent in US “continuation” funds – offer more frequent ‘liquidity windows’ for investors to redeem their money.
Schroders launched the UK’s first LTAF in April 2024 and Vikram Bhandari, multi-asset CIO at Schroders Capital Solutions, participated in the recent Funds Europe private markets roundtable.
He said that so far investors had been “quite sanguine” about the liquidity risk but noted that semi-liquid funds have not yet been tested in stressed market conditions.
Another participant spoke about how semi-liquids were proving useful as a way for general partners – the portfolio managers – to extend their investment horizons in the assets they hold.
“For any manager operating a continuation vehicle, it is a good thing if they can roll over their investment from a longer-established strategy and into the new vehicle. With this secondary transaction, the manager can capitalise on the same underlying asset for a longer tenure and open it up to new investors.”
Participants in our report were:
- David Hedalen, head of private markets research, Aviva Investors
- Emmanuel Deblanc, CIO private markets, M&G Investments
- Adam Baghdadi, head of lending, Arrow Global
- Marc Chowrimootoo, portfolio manager, Hayfin
- Vikram Bhandari, multi-asset CIO, Schroders Capital Solutions
- Thomas Duetoft, senior loan strategy portfolio manager, Pemberton
- David Kubilus, chief commercial officer (Luxembourg & UK), US Bank
- Ken Somerville, head of global fund servicers, Ireland, US Bank
*Read the full report here.
