A couple of recent announcements and reports shed some interesting light on the recent evolution of private markets fundraising.
One is an April 21 announcement of a joint investment by TPG and Temasek, alongside existing investor TA Associates, into Cliffwater LLC, an alternatives focused advisory firm that has expanded into providing private markets funds.
The other is an April 17 report about Cliffwater published by PitchBook, focusing particularly on the success of the Cliffwater Corporate Lending Fund, a vehicle offering an “interval fund” structure, sidestepping liquidity constraints through a mutual fund-like perpetual structure.
The report specifically links such interval funds to the open-ended evergreen funds offered by private assets majors, noting that such funds accounted for 41% of funds raised by the top publicly traded private equity firms in the fourth quarter of 2024. It also highlights other big name private markets advisers who have diversified into fund management, including Cambridge Associates, Hamilton Lane, Mercer, StepStone.
This raises the risk of conflict of interest. The International Private Equity defines gatekeepers as professional advisers operating in the private equity market on behalf of their clients. It says these advisers exist because most institutional investors don’t have sufficient exposure to private equity to justify building and/or retaining in-house expertise.
Gatekeepers were launched to do what their name suggests: manage relationships between institutions, wealthy investors and other capital sources, and private markets funds, in allocation strategies, fund selection and due diligence, and portfolio construction, among other things.
Clearly, many firms which started as gatekeepers have found the attractions of fund management too much to ignore. PitchBook describes “an industry-wide fundraising shift as the largest managers increasingly tap the wealth channel at a time when institutional LP-focused capital formation is drying up”. This implies that pension funds and other historic private markets limited partners don’t want to invest so much in private assets any more. Indeed, the PitchBook report details how interval and evergreen funds are structured to offer access to smaller high-net-worth individuals
Egyptian billionaire businessman and investor Nassef Onsi Sawiris was quoted in the Financial Times recently as saying that that private equity continuation funds are “the biggest scam ever”. There may well be differences between interval, evergreen and continuation funds, but the investment cases at least look similar. And gatekeepers that were launched to provide impartial advice to LPs on fund choice are now offering their own funds to the audience that Sawiris specifically warned about concerns over such funds.