Traditional private market funds are primarily closed-end funds that are characterised by the following features:

• Fixed term: generally speaking, a fund cycle lasts between ten and twelve years, often with extension options

• Capital calls over several years: the capital is not invested immediately, but is rather drawn down in instalments over a period of three to five years

• Blind pool principle: upon subscribing, investors do not know exactly which assets will be included in the portfolio

• High minimum investments: the minimum investment usually stands at CHF 5 million for private investors and CHF 10 million for institutional investors

• Limited liquidity: selling units during the term is hardly possible or only at a discount on the secondary market

• J-curve: the J-curve shows the typical course of the return (explanation below)

These closed-end structures are especially suitable for experienced investors, but are less attractive for many private investors.

The J-curve describes the typical capital flow of a closed-end private market fund. During the first few years, which  are referred to as the start-up period, capital is called from investors to make initial investments. In addition, management fees are also incurred at a time at which the investments have not yet appreciated in value. The J-curve during this phase therefore finds itself in negative territory.

After a few years, the investments start to bear fruit and the uptrend begins. Companies grow, there are operational improvements and increases in value become visible.

In the harvest period, investments are sold, generating increasing returns for investors.

Evergreen funds are a relatively new structure in the private market segment. Their most important features are as follows:

• Immediate investments: 100% investment from day 1 in a broadly diversified portfolio without years of capital calls

• Transparency: investors can already see existing investments in the portfolio

• Low entry barriers: from CHF 25,000 depending on the fund structure

• Certain predefined partial liquidity: investors can usually buy on a monthly basis and sell on a quarterly basis

• Minimisation of the J-curve effect: as 100% of the capital is invested from day 1, there is no J-curve

• Simple performance measurement: the return is calculated as an annual return, meaning it is more easily comparable with traditional investments

To ensure liquidity, most evergreen funds have a liquidity reserve of between 15% and 20%, which is primarily held in the form of cash, government bonds or money market funds. This allows for redemptions to be met. This liquidity component can slightly dilute the overall return, which is why evergreen funds often have a lower management fee than their closed-end counterparts.

Both closed-end funds and evergreen funds have their place and cater to different types of investor.

Private investors who are looking for broad diversification, simple handling and regular liquidity opportunities particularly benefit from evergreen structures. On the other hand, investors who are prepared to tie up their capital over many years and want to focus on a less diversified portfolio (e.g. a co-investment) in order to potentially achieve higher returns can invest in closed-end funds. Both types of investors should adopt a long investment horizon in order to invest in private market investments.

Our advisory team would be happy to assist you in person. You can reach us via e-mail or by calling +41 44 286 25 25.

_{This publication is intended for information and marketing purposes only, and is not geared to the conclusion of a contract. It only contains the market and investment commentaries of Maerki Baumann & Co. AG and an assessment of selected financial instruments. Consequently, this publication does not constitute investment advice or a specific individual investment recommendation, and is not an offer for the purchase or sale of investment instruments. The future performance of investments cannot be inferred from past price performance. In other words, the value of investments may increase but may also decrease, and the investor may be required to make additional payments for certain products. In certain circumstances, figures may refer to reporting periods of less than five years, which could reduce their validity. Predictions for the future are always non-binding assumptions. Figures presented in foreign currencies are also subject to exchange rate fluctuations, which can affect their performance. The information in this publication is in no way to be understood as an assurance of future performance. Maerki Baumann & Co. AG does not provide legal or tax advice. In addition, Maerki Baumann & Co. AG accepts no liability whatsoever for the content of this document; in particular, it does not accept any liability for losses of any kind, whether direct, indirect or incidental, which may be incurred as a result of using the information contained in this document and/or arising from the risks inherent in the financial markets.}

_{*Please note that due to German regulatory requirements we are unable to provide the crypto service (Crypto focus module) named in this brochure to our clients domiciled in Germany.}

Editorial deadline: 14 April 2025

Maerki Baumann & Co. AG
Dreikönigstrasse 6, CH-8002 Zurich
T +41 44 286 25 25, info@maerki-baumann.ch
www.maerki-baumann.ch