By Joe Woodbury, Director, Business Development
At a glance
Private wealth is becoming an increasingly important source of capital for private markets. As private banks, family offices and ultra-high-net-worth (UHNW) investors seek greater exposure to alternative assets, managers are evaluating how best to engage with this expanding investor base.
Evergreen funds and private markets “retailisation” are increasingly hot topics in this context. But what are the practical realities behind these trends?
This was the topic of discussion when I sat down recently with Will Normand, Head of Asset Management at Travers Smith.
Throughout the interview, Will shared insightful commentary on the evolution of private wealth capital and the different ways managers can approach the wealth channel. He dove into the realities behind the so-called retailisation of private markets, the opportunities and challenges presented by evergreen funds, and the considerations managers should weigh before expanding beyond their traditional institutional investor base.
Q&A with Will Normand, Head of Asset Management at Travers Smith
Private markets “retailisation” has become one of the industry’s most talked-about themes. Is the term itself misleading, and what is really driving the growth of private wealth capital in private markets?
Will Normand: I think the term is probably slightly misleading. Personally, I prefer to talk about the diversification of the investor base because that’s what is really happening.
When people talk about retailisation, they’re generally not referring to private markets managers marketing directly to retail investors. Instead, they’re talking about investors accessing private markets through private banks, global wealth managers and other advised channels.
That’s an important distinction. Investors coming through these channels tend to be more sophisticated and benefit from professional advice and oversight. As a result, there’s a different risk profile and approach as compared with direct-to-retail distribution.
The growth we are seeing is therefore less about direct retail participation and more about private wealth becoming a larger and more important component of the private markets investor base.
Why are private banks, family offices and UHNW investors increasingly attracted to evergreen fund structures, and how do their objectives differ from those of traditional institutional investors?
Will: Fundamentally, the assets being accessed through evergreen funds are often the same assets institutional investors access through traditional closed-ended funds. The attraction of private markets as an asset class remains largely the same.
The difference lies in the structure.
Evergreen funds have been designed with wealth management requirements in mind. Closed-ended drawdown funds can be challenging for wealth managers because they involve long lock-up periods and capital calls that must be managed across large numbers of underlying clients.
Evergreen funds operate differently. Investors typically subscribe monthly at net asset value and on a fully drawn basis, which is operationally much easier for wealth managers to administer.
Another important point is liquidity. Evergreen funds are not fully liquid products and the industry is increasingly moving away from terms such as “semi-liquid”. However, they do usually offer some level of periodic liquidity, often around 5% per quarter, which can make them more suitable for wealth clients than structures requiring capital to remain locked up for nine years or more.
In addition, certain evergreen structures can be distributed to a broader investor base from a regulatory perspective. Combined with the operational simplicity and more flexible liquidity profile, this makes them particularly attractive to private wealth investors.
How are different managers tackling access to the wealth channel, and is it a one-size-fits-all approach?
Will: It definitely isn’t a one-size-fits-all approach.
Managers need to think about the wealth opportunity through the lens of their own business and what they’re trying to achieve.
Broadly speaking, there are three possible approaches.
The first is the full evergreen route, where managers launch dedicated evergreen products designed specifically for the wealth channel.
The second is a more selective approach. Managers may decide not to launch an evergreen fund but instead facilitate investment from private wealth through feeder structures into their existing institutional funds. Alternatively, they may offer their services as delegated portfolio managers in fund-of-funds strategies where another manager operates the fund structure that is facing sub-professional investors.
The third option is to do nothing at all, and for some managers that can be a perfectly valid strategic decision.
Interestingly, institutional investors are increasingly asking questions about managers’ private wealth plans and how those plans could affect institutional strategies. Some managers may therefore decide that remaining exclusively focused on institutional capital is actually an attractive differentiator.
The most important thing is making a deliberate strategic choice rather than simply following industry trends.
What are the determinative factors that cause a manager to pick one approach over another?
Will: Launching an evergreen fund requires a very specific combination of factors.
First, brand recognition matters. It isn’t everything, but established managers with strong global brands naturally have an advantage when marketing to private banks and wealth managers.
Second, managers need a significant pipeline of investment opportunities. An evergreen fund receives capital continuously, so managers must be able to deploy that capital efficiently while ensuring they are not disadvantaging their institutional investors.
Third, there is the operational challenge. Running an evergreen fund requires liquidity management, sophisticated operational infrastructure and often dedicated investor relations capabilities. It represents a meaningful commitment of resources.
When you combine those factors, it isn’t surprising that many of the firms successfully operating evergreen programmes today are the largest global managers by assets under management.
At the other end of the spectrum, some boutique managers may conclude that pursuing private wealth would distract from their core institutional business.
Between those two extremes sits a large group of managers that may choose alternative routes, such as wealth feeders, separately managed accounts (SMAs) or participation in fund-of-funds platforms.
Looking ahead over the next five years, how do you see the private wealth landscape evolving? Will evergreen funds become the dominant route into private markets, or do you expect multiple distribution models to coexist?
Will: Predicting five years into the future is always dangerous, but I think private wealth will continue to grow as a source of capital for private markets.
That said, I don’t see private wealth replacing institutional investors. Institutional capital will remain the dominant driver of the industry for the foreseeable future, although private wealth will undoubtedly account for a larger share of total allocations than it does today.
I also expect the largest managers to continue capturing a significant proportion of evergreen fund flows. The firms that have already established strong positions in the market are likely to become even stronger.
However, I don’t believe the market will converge around a single model.
We’re likely to see continued growth in wealth feeders, SMAs, fund-of-funds solutions and other forms of private wealth access. We may also see increased interest in diversified evergreen structures such as public-private hybrid funds that combine traditional traded securities and private assets in a single portfolio solution.
As the market matures, education will also play an important role. Recent discussions around liquidity have highlighted that investors cannot always expect immediate access to capital. While those conversations have created challenges, they have also improved investor understanding of how these products actually work.
That’s ultimately healthy for the market because it helps ensure investors participate with realistic expectations.
What lessons can managers learn from the firms that have successfully built and scaled private wealth offerings over the past decade?
Will: The biggest lesson is that building a successful private wealth business is difficult and requires significant commitment.
There can sometimes be a tendency to look at the most prominent success stories and assume every manager should follow the same path. In reality, there is no universal blueprint.
Managers need to start by asking themselves a simple question: what are we trying to achieve?
Once they’ve answered that, they can build a strategy that aligns with their capabilities, investor base and long-term objectives. For some firms, that will mean launching an evergreen fund. For others, it may involve developing a handful of strategic wealth management relationships. Some may decide not to pursue the opportunity at all.
The firms that have been most successful have generally been those that have adopted a clear, deliberate strategy rather than simply reacting to market momentum.
What other factors should managers consider when targeting the wealth channel, including the risks and rewards beyond simply how to access it?
Will: Managers need to think about this in a very considered way.
Entering the wealth channel can create significant opportunities, but it can also introduce new risks. Those risks include operational complexity, liquidity management considerations, regulatory requirements and reputational considerations.
Perhaps most importantly, managers need to think about their existing investor base. Any wealth strategy should be designed in a way that preserves confidence among institutional investors and does not create conflicts between different groups of investors.
There is always a balance between risk and reward. Growing access to private wealth can be highly attractive, but managers must ensure they have the infrastructure, governance and strategic clarity to manage that growth effectively.
Ultimately, success comes down to thoughtful planning. Whether a manager chooses to launch an evergreen fund, pursue alternative wealth solutions or remain focused on institutional capital, the decision should be aligned with its broader business objectives and made with a clear understanding of both the opportunities and the challenges involved.
About our guest
Will Normand is Head of Asset Management at Travers Smith and has a broad practice advising on a wide range of products, but with particular emphasis on semi-liquid structures for alternative asset managers. Will’s focus is on products designed to diversity a manager’s investor base away from just institutional clients, including structuring Part II UCI and ELTIF funds specifically targeted at wealth managers and private banks. He’s also heavily involved in industry efforts associated with the regulation of broadening private assets access to non-professional investors.
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