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Blackstone and KKR see early institutional demand for evergreen funds
Institutional investors are using evergreen private market structures as an alternative to long lockups in traditional private equity, though their share of capital raised remains small.
Institutional investors are beginning to allocate capital to evergreen private market funds originally designed for wealthy individuals at Blackstone and KKR, according to the Financial Times, with evergreen structures allowing investors to add capital at set intervals rather than locking funds up for a decade-long fund life.
Blackstone’s wealth business has seen institutions start routing money into its evergreen products, but the outlet said institutional capital remains only a small proportion of the total capital raised. The firms’ growing institutional validation comes as both companies and Apollo expanded evergreen vehicles for individual investors, and institutions are increasingly comfortable placing capital into the models that rely on a more liquid structure.
For KKR, the Financial Times also pointed to changes in deal-allocation terms for its evergreen K-Series funds. KKR separately raised the share of deals those funds can take from a longstanding 7.5% cap to as much as 20% in some cases, including vehicles such as its $8 billion European Fund VI.
The report framed the shift as a solution to a key concern for institutions, namely that traditional private equity has faced challenges on exits and return of capital. Evergreen funds offer institutions a way to remain invested while avoiding the lockup risk that often comes with conventional private equity fund structures.