Henry Lin, CEO at Linnovate Partners was recently featured in Preqin’s blog post “Evergreen Funds: Hold Forever”.
Henry, together with other industry experts, discussed Sequoia’s open-ended approach to private capital and its implications on the future.
Henry Lin, CEO at Linnovate Partners
“Traditional private equity funds have been losing some luster in recent years. LPs have become increasingly frustrated with high management fees, illiquidity of the investments, and the strategy of selling the best companies earliest.
Although it is uncommon to set up an evergreen fund under the private equity & venture capital (PEVC) structure, open-ended and evergreen structures have existed for a long time. Having a hybrid fund structure that combines evergreen and close-ended structures can provide both liquid and illiquid capability for long-term investors. Without an end date, fund managers can truly focus on long-term capital appreciation and asset management for investors. Evergreen funds will continue to grow as LPs and business owners search for new strategies that are better for certain companies. For portfolio companies, they provide continued support for pre-IPO preparation and growth post-IPO.
However, even as asset owners increasingly invest in evergreen structures, citing better deal terms and fees, these structures still pose challenges. The funds are novel in nature and are more difficult to market to prospective LPs and investment committees. And if a fund manager underperforms, it is tough to implement the necessary changes.”
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