Long-dated private equity funds appeal to investors who dislike the constant churn of typical PE funds, but Commonfund isn’t convinced that evergreen funds’ returns will measure up over the long haul.
Large public pensions say long-dated PE funds can match their long-term liabilities better than traditional funds with 10-to-12 year terms. New York’s retirement plan recently committed $500 million to Vista’s perennial fund, and CalPERS is going a step further, planning its own perpetual investment vehicle for long-term ownership of “core economy” companies.
Commonfund, which manages $24.1 billion in endowment and foundation assets, says those types of funds offer more convenience than returns.
“I’m not a huge fan of long-dated funds,” Commonfund Capital President and CEO Peter Burns said. “[Very few companies] can sustain an edge in whatever they do for 20 years. They may have a great company with great products and great margins, but 15 years later the game may have changed completely, with new technology and new competitors.”
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