Evergreen funds and ELTIF 2: Unlocking private markets for individual investors

In 2015, a new range of funds called Evergreen with a 99-year lifespan appeared. The advantage of these Evergreen funds is that they offer their clients immediate exposure to private companies, eliminate the J-curve phenomenon found in a closed fund and are accessible to entrance tickets of a few hundred euros according to insurers, provided investors understand the subtleties.

Your experience in launching Evergreen funds (Why? Is it a success?)

Drawing on our experience in private markets for more than 50 years, and for 25 years for private clients, Eurazeo launched its first Evergreen fund in 2018 to respond to a new market trend aimed at democratising Private Equity funds among private clients.

The success of Evergreen funds depends on their ability to meet the expectations of all investor market segments, from the mass affluent to institutional clients. Private clients are seeking to both give meaning to their savings, diversify and be in control of their schedule. Thanks to their “open” structure allowing entry when desired and exit at given intervals, these funds offer great flexibility as well as increased liquidity for investors, compared to the classic closed-ended fund model with a given subscription period, a long lock-up period and distributions as managers materialise portfolio exits.

This market trend towards the evergreen model has been confirmed, particularly at Eurazeo, where the Private Value Europe 3 fund will soon reach €3 billion¹ in net assets, raised only from individuals in France and, more recently, Luxembourg and Belgium. It should be noted, however, that not all investment strategies are adapted to the evergreen fund: very diversified, regular strategies in terms of deployment and performance must be implemented in order to ensure a certain liquidity and performance. Cash management is also very important in this type of fund. This is why the bulk of the evergreen funds that are launched generally combine several investment strategies and are implemented by international fund managers able to invest significant amounts each year.

What are the prospects for these new vehicles with ELTIF 2?

The outlook for new investment vehicles with ELTIF 2 is promising. The ELTIF 2 regulation, which came into force on 10 January 2024, aims to offer asset management companies the opportunity to benefit from a marketing passport for institutional and private investors throughout the European Union.

ELTIFs, created in 2015, have only recently actually started to be used and are mainly marketed in Italy, France, Germany and Spain. Their growth is staggering: from €5 billion in 2017, they should represent in excess of €35 billion by 2028².

These regulatory changes encourage asset management companies to adapt their offerings to meet the needs of retail investors by simplifying investment processes and offering better European accessibility. For Eurazeo, this is a real opportunity to expand its range on a European scale and to open up to a private client market in Europe. To do this, we are structuring a new ELTIF 2 fund, which will soon be available for subscription, called Eurazeo Prime Income Credit (“EPIC”), and which will focus on a 100% private debt strategy.

Do you see a real appetite from private investors?

Yes, there is a real growing appetite from private investors for the unlisted market. For a long time, this asset class was reserved for institutional investors, due to demanding investment conditions such as high entrance fees, long- term commitments and liquidity that was limited and, above all, in the hands of asset managers.

Investor interest in unlisted markets has intensified, supported by recent regulations such as the “Industrie Verte” Act in France and ELTIF 2.0 at EU level, which encourage asset management companies to diversify their sources of funding. However, although interest is growing, Private Equity remains underrepresented in the portfolios of French private investors, with less than 1% of allocation compared to 20% in the United States. This discrepancy is largely due to a lack of training and education for retail investors. With better financial education and greater accessibility, Private Equity should gradually find its place in French and European investors’ portfolios. Today, as proof of our commitment to private investors since the early 2000s, 14% of the Eurazeo group’s AUM, or EUR 5 billion, comes from private clients.

Do you think retail investors will give new impetus to private markets?

Despite the reduction in institutional investor allocations since 2022, the share of private client fundraising in the unlisted market continues to grow. Retail investors have the potential to reinvigorate these markets by providing a new source of capital and diversifying investor bases. Their interest, supported by favourable regulations and innovative products, is a positive sign for the future of private markets. Easier access to investments through crowdfunding platforms and increased transparency through technology are further reinforcing this trend. These developments could offset the decline in institutional investment and support private market growth.

Agathe Bubbe, Director in the Wealth Solutions team, Eurazeo

¹Source: Internal Eurazeo source. 
²Source: Scope Fund Analysis; European ELTIF study 2022-2024.