Unraveling the Intricacies of Permanent Investment Vehicles
In the dynamic world of asset management, evergreen funds have emerged as a popular choice for both retail and institutional investors. These funds offer a unique blend of open-ended and closed-ended features, providing long-term investment opportunities with continuous investment and periodic liquidity options. However, managing evergreen funds comes with its own set of operational challenges.
One of the key operational challenges is the complex capital allocation and drawdown calculations. Traditional methods based on commitments or queue systems may not suit evergreen structures, complicating allocation logic. MUFG Investor Services has addressed this issue by custom-fitting a solution for an asset manager facing a complicated evergreen fund structure, addressing performance and management fee calculations with different start dates, rates, bases, and rebates.
Cash and liquidity management is another area of concern in evergreen funds. With ongoing inflows and outflows without fixed maturity dates, heightened liquidity management is required to match investors’ liquidity needs with investment timing, complicated by lock-in periods or slow pay provisions. MUFG's integrated automated payments and settlements platform provides solutions for slow pay and full redemption in evergreen funds.
The frequent and complex investor operations, including continuous onboarding, AML/KYC checks, and transfer agent activities, intensify due to constant fundraising opportunities and higher redemption frequencies. MUFG ensures ownership records are accurately maintained by leveraging transfer agent licenses and streamlines critical fund activity by automating connectivity between fund accounting and transfer agency platforms.
Another operational challenge is the frequent NAV and performance calculations. Net asset value (NAV) and investment performance must be recalculated more often due to ongoing investor activity and fund movements. MUFG's clients are using their cutting-edge fee calculation tool to run waterfall, carried interest modeling, and performance fees per investor in the fund, whether there are 10 or 1,000 investors.
Legacy system limitations and operational scaling pose a significant challenge in managing evergreen funds. Existing platforms often struggle with the more complex, high-volume and continuous processes in evergreen funds, requiring manual workarounds and point solutions, increasing operational risk and inefficiency. MUFG Investor Services team supports lifecycle management with an integrated ecosystem, consolidating data storage, record-keeping, and reporting in one system to improve accuracy and efficiency at scale.
Experienced fund administrators play a crucial role in assisting asset managers with evergreen funds. They provide technology-enabled front-, middle-, and back-office automation, custom solutions leveraging existing platforms, enhanced investor operations support, and an advisory role from the fund design stage, helping fund managers structure operational, compliance, and reporting frameworks specific to evergreen and semi-liquid fund attributes, anticipating broader investor bases and regulatory requirements.
Institutional investors are limited in the number of closed-ended investments they can participate in, and evergreen structures help address this limitation. Asset managers are turning to semi-liquid approaches, such as evergreen funds, to capture trillions of dollars in fresh capital. MUFG's in-country teams help support asset managers' operational processes as they navigate jurisdiction-specific requirements, and their technology enables validated reporting globally.
In conclusion, partnering with experienced fund administrators skilled in evergreen fund complexities enables asset managers to reduce operational burden, improve efficiency, ensure compliance, and scale their funds more smoothly in a challenging and evolving environment.
In the realm of fund administration, experienced providers offer assistance by providing technology-enabled automation for various operational tasks, custom solutions for complex structures, enhanced investor operations support, and advisory services from the fund design stage, particularly for evergreen and semi-liquid funds. These providers help asset managers structure operational, compliance, and reporting frameworks tailored to the unique attributes of these funds, anticipating broader investor bases and regulatory requirements.
Moreover, as institutional investors are limited in the number of closed-ended investments they can participate in, evergreen structures help address this limitation. Asset managers are increasingly turning to semi-liquid approaches, such as evergreen funds, to capture trillions of dollars in fresh capital, and these experienced fund administrators enable asset managers to smoothly scale their funds in a challenging and evolving market.
