Wall Street banks pitch forever funds for private equity assets - Bloomberg

Investing.com -- Wall Street investment banks are pitching long-duration private equity structures that could fundamentally alter how buyout firms manage mature assets.

Goldman Sachs Group Inc (NYSE: GS) and Evercore Inc (NYSE: EVR), alongside advisory groups including Jefferies Financial Group Inc (NYSE: JEF), Raymond James Financial Inc (NYSE: RJF), and Lazard Inc., are gauging institutional investor appetite for "evergreen continuation vehicles," according to reporting from Bloomberg. These so-called "forever funds" are designed to let buyout shops hold prized portfolio companies for 10 to 15 years, significantly extending beyond the standard five-year horizon of traditional continuation funds.

The push comes as private equity sponsors navigate prolonged exit headwinds, driven by elevated borrowing costs and muted valuation multiples. In response, fund managers have increasingly turned to continuation vehicles and "CV-squared" structures, rolling an asset from one continuation vehicle into another, to return capital to limited partners without initiating outright asset sales.

The emerging evergreen framework seeks to eliminate the fixed lifespans inherent to traditional fund structures, creating permanent capital vehicles with ongoing growth capacity. "These vehicles will have more unfunded capital to support the growth of the asset, and there is no pressure to exit," Sunaina Sinha Haldea, global head of private capital advisory at Raymond James, told Bloomberg.

While permanent capital structures offer operational continuity, they introduce complex liquidity and governance considerations for institutional investors. Longer holding periods will likely draw heightened scrutiny around carried interest calculations, fee arrangements, and underlying revenue growth expectations for roll-over assets.

To address exit mechanics for departing investors, bankers are exploring structural features such as portfolio cash flow distributions, secondary liquidity tenders, and staple financing commitments. These mechanisms are intended to provide flexible cash-out options for existing limited partners while facilitating capital commitments from incoming investors.

Original Article

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