Not due to lack of funds to cover (there are plenty), but because each one takes considerable time and effort. Like all unhappy families in Tolstoy’s Anna Karenina, every fund is different, and thus impossible to fully streamline.

This week, I'm making an exception. The minute I read the announcement, I knew I'd be clearing my calendar to write about it.

Before we get into the details, a disclosure: of all financial organizations, Vanguard is probably the one I’m most loyal to. I’ve been a happy customer for over two decades.

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Fun fact: many moons ago, bright-eyed and bushy-tailed, I called Vanguard’s 1-800 number before opening my very first IRA with income from my first job. As part of my extremely sophisticated due diligence process, I asked the representative: “What happens to my money if Vanguard goes bankrupt?” I’m sure she got a good chuckle out of that one.

Over the years, I've had nothing but excellent experiences with the company and the people who work there. Which is why it took me about 24 hours (and a screaming pillow) to get into the right mind to write this piece in a neutral way.

Anywho, I’ll present you with the facts first, and reserve my opinion until the very end.

Important disclosure. This case study is independent analysis published for educational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security. All information is sourced from the fund's prospectus (dated June 30, 2026), the prospectus supplement (dated July 21, 2026), the Statement of Additional Information, SEC filings, and publicly available company materials. Return estimates are hypothetical and for illustrative purposes only — they are not projections or guarantees. The author has no position in the WVB All Markets Fund and no business relationship with Wellington Management, Blackstone, or Vanguard.

A good time to resurrect this great post (you’ll see why in a minute):

What WVB Got Right

Let’s start with what this fund gets right.

1. Access

Deep in my heart, I believe that a bigger menu of investment options is good for investors. With the right guardrails in place (things like, you know, hefty penalties for fraud), and good disclosure (being able to see what’s inside funds and how much it costs to invest, for example), there is no reason to gatekeep anything from any class of investors. If you can place Fed rate bets on Kalshi, why shouldn’t you be able to access private equity funds?

On the access front, this fund delivers.

Investors get institutional-quality public/private asset allocation in a single ticker, with daily subscriptions, 1099 tax reporting, a $2,500 minimum, and a headline management fee of just 0.10%.

Which brings us to the second good point.

2. Fees

The very Vanguard-esque 0.10% is what the fund leads with. Bogleheads rejoice? Not so fast. This is a fund-of-funds, and the underlying fund fees are a thing to behold.

Before we get into the fee structure, let me give you a question to ponder:

Why are they doing it?

👉 The real business here is the asset gathering. I wrote about it just a few days ago:

Wellington earns advisory fees (their bread and butter). Vanguard gets another flagship product to keep assets inside its ecosystem (new wrapper for their existing products). Blackstone gets access to one of the largest retail distribution channels in the world (and gets to collect management fees of 1-1.25% plus carry of 10-15% on the underlying funds).

The prospectus requires that at least 20% of assets be invested in Blackstone funds and at least 20% in Vanguard funds (measured at the time of investment). That effectively creates a permanent pipeline of capital into each partner's products.

And here are two deep dives on the Blackstone funds:

And a fun side note on BREIT:

The Fee Stack

From the prospectus:

The 0.10% management fee is waived for three years (with no clawback). So the advisory fee is effectively zero until ~2029. And the 2.56% in "Other Expenses" is a launch-phase number based on an estimated $100M in assets; it should compress as the fund scales.

IMPORTANT:

The 0.68% in underlying fund fees (the “Acquired Fund Fees and Expenses”, or AFFE) covers the operating costs of the Blackstone and Vanguard funds inside this vehicle. What it does not include, per the prospectus itself, are “performance-based fees or allocations calculated solely on the realization and/or distribution of gains.”

Translation: Blackstone’s carry (which runs 10–15% of net profits) is not in the expense ratio.

Note that expense limitation agreement (the thing keeping “Other Expenses” from eating you alive) is renewable annually but not guaranteed. It also lets Wellington recapture absorbed expenses within 36 months.

Now. All of that said. I’ve said this before and I’ll say it again: don’t get too hung up on fees if your returns compensate you for them.

So let’s look at that.

What Do You Get for All Those Fees?

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Six months of new filings are now in, so time for a vibe check an update on where the fund stands: how much capital came in, how the fund’s leverage picture changed, and what the earnings underneath the distributions actually look like.

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Here’s the post from December (which feels like a lifetime ago)

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions. All figures below are from CELFX's SEC filings, in six-month increments ending each March 31 and September 30. Gain/loss figures are shown net and after-tax.

👉 No idea what an interval fund is? Lucky you (j/k)!
Start here:

And then read this:

What Hasn’t Changed

Something of note: many of the underlying funds are not registered under the 1940 Act (unlike CELFX itself), which has two implications:

1. They likely rely on Section 3(c)(1) (fewer than 100 beneficial owners) or Section 3(c)(7) (qualified purchasers only) exclusions. Translation: most mere mortals are not wealthy or connected enough to invest in them directly.
   CELFX, meanwhile, dropped the accredited investor self-certification requirement in its latest prospectus supplement. Regulatory arbitrage, if you will.

2. The underlying funds are not subject to the 1940 Act’s leverage limits. This means their borrowing is constrained only by LP agreements and lender appetite. More on leverage in a minute.

Assets Keep Growing

Net assets have grown in every reporting period. Most recently, from roughly $5.36B (3/31/25) to $7.82B a year later (~46% in twelve months), but the growth is slowing down:

Why is it slowing down?

Capital inflows are reversing, that’s why.

👉 Say it with me one more time:

Capital Flows

The growth is driven by new subscriptions, which (for now?) continue to run ahead of redemptions. Measured against net assets at the start of each period, sales have remained robust. That’s the good news.

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That’s when fund managers stopped hunting returns and started farming assets.

The hunter’s model was simple: 2% management fees kept the lights on. 20% carried interest made you rich. Funds were small, and GPs ate what they killed.

Then the industry discovered agriculture.

Why spend your life chasing unpredictable carry when you can cultivate an ever-growing field of fee-paying capital? Carry once made fortunes. Today, fortunes are made from recurring management fees.

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The strongest evidence that gathering won? Management fees fell. It sounds backwards, but I’ll explain.

Case in point: when Bridgepoint agreed to pay $1.4 billion for Kayne Anderson Real Estate this summer, it bought 100% of the fee-related earnings, and just 15% of the carry in historic funds:

Falling Rates, Fatter Harvest

Buyout funds raised in 2025 charged an average management fee of 1.61% (the lowest ever recorded). It’s been a steady 15-year slide (with a brief reversion during the 2020 fundraising boom):

Victory for LPs? Maybe.

Preqin argues the biggest driver is simply fund size. Nearly half of all capital raised in 2025 flowed to the ten largest buyout funds (up from 34.5% in 2024). There are economies of scale in managing larger funds.

But decreasing fee rates do not mean asset managers are earning fewer dollars. Look at the math:

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That's what reading CIM Real Assets & Credit Fund's schedule of investments felt like.

Most interval funds own one thing. Private credit funds own loans. Real estate funds own buildings. Infrastructure funds own… I dunno, some cables. RACR apparently looked at that concept and said, “Why choose?”

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The fund is not big by institutional standards ($237.7M in net assets), but it comes with a lot of different things in one small package. The portfolio is:

• part direct real estate,

• part commercial mortgage bonds,

• part CLO debt,

• part CLO equity,

• part leveraged loans, sprinkled with common stocks for good measure,

and held in piece with derivatives and financing agreements. Plus unitranche loans and, of course, some PIK. (I am not kidding)

Anywho, lack of diversification is not this fund’s problem.

The problem is that nearly every major asset class in the portfolio is financed with leverage, derivatives, or repos, yet shareholders have earned remarkably little for taking on all that complexity.

🔎 It is my hope that today’s case study inspires you to start looking at the schedule of investments. Closely. And reading the fine print on how things are financed. Also closely.

If I haven’t yet turned you into someone who compulsively reads schedules of investments and footnotes, I’m clearly not doing my job (or you are new here).

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

What’s in the fund

As of March 31, 2026:

• Cost of investments: ~$350 million.

• Current fair value: ~$314 million.

In other words: the fund is sitting on approximately $36 million of unrealized losses (or 10.3% of cost):

Now let’s look at the more interesting thing: what’s inside and how it’s financed

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Every other week, we send a quick digest on what’s catching our eye across private markets.

Today’s lineup:

1️⃣ Private equity: valuations vs exits
2️⃣ Private credit: retail wants out, institutions want more
3️⃣ Commercial real estate: data centers
🎁 Bonus: a report on evergreens and secondaries

1️⃣ Private Equity

Chart of the week, right here:

You are looking at buyout valuation multiples (the multiple of EBITDA private equity sponsors pay to acquire a business). The multiples are near the 2021 record high. What has happened since 2021? Rates have gone up substantially, which makes leveraged buyouts more expensive to buy. And yet, entry multiples keep climbing.

The other side of the ledger tells a different story: more than 16,000 companies globally have now been held for over four years (also a record!) That’s 52% of all buyout inventory.

Exits were up by volume in 2025, but largely due to gigantic IPOs. Smaller portfolio companies are being held on to and maturing like … (A. fine wine; B. milk?)

2️⃣ Private Credit

1. Institutions are doubling down

While retail clients head for the exits (here’s a great article on the subject of redemption queues and how the math works), institutions are doubling down. North American direct lending funds raised ~$16B in Q2 (the second-strongest quarter in four years).

What’s attracting investors? Wider spreads, tighter docs, and higher rates. Keep in mind, most of this capital was committed to drawdown funds, meaning it won’t deploy immediately. How much of the sales pitch centered on expected distress, folks?

2. On investor concentration

Speaking of retail investors heading for the exits, in late 2025, UBS advised clients to reduce private credit exposure. Turns out, 60% of Blue Owl Technology Income Corp. (OTIC) had reportedly been raised through UBS clients (FT).

When a single distributor represents that much of your investor base, a change in allocation guidance turns into a redemption problem.

Guess what? As an outside investor, you usually have no way of knowing how concentrated a fund's distribution channels really are. Something to ponder for your next allocation…

3️⃣ Commercial Real Estate

Data centres are the new darlings (“Duh, Leyla”)

Data center deal volumes surged 37% in 2025 (McKinsey). It is now the fastest-growing segment globally. The capex story is massive: $3T in infrastructure needed by 2030, 100 GW of new capacity, $1.2T in real estate value creation.

The constraint is power. Sites that can deliver 300+ MW in under 36 months now outrank pure connectivity plays. As a side note, regulatory and community delays have killed $64B in US projects since 2023.

I’m not nearly smart enough to call the top in data centers, but here’s what happened to a fund that bought a bunch of CRE at the peak:

Secondaries

Meketa's latest paper on secondaries highlights many issues we've flagged: NAV-squeezing, inflow-driven returns, and evergreen fund misuse of secondaries as a liquidity crutch.

Interesting chart from the paper: in H1 2025, over 20% of secondaries volume was vintage 2015 and older. Stale assets, trading at a discount, being stored in fresh vehicles.

Thanks for reading! As always, if you have any suggestions, reply to this email, leave a comment, or find me on socials (unhinged me on X, slightly more filtered me on LinkedIn)
-Leyla

P.S. New here?

Here’s where you’ll find the full archive (somewhat organized):

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That’s what makes this case study by so interesting.

Bridgepoint’s acquisition of Kayne Anderson Real Estate offers a rare window into how alternative asset managers are valued, what buyers are actually paying for, and why recurring management fees can be worth far more than carried interest. This is an inside look into alignment, fundraising, operating leverage, and what it takes to build a platform that’s valuable beyond the underlying real estate.

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👉 Browse our full library of commercial real estate analysis, deep dives, and case studies here (link). And here’s a recent fund write up:

About the author

CRE Analyst is the research brand behind FastTrack, the commercial real estate training program now in its seventh year with 2,000+ alumni. Founded by an institutional fund manager and a regional developer, it draws on 35 years of commercial real estate experience across acquisitions, development, asset management, research, and fund management. Reach CRE Analyst at admin@creanalyst.com, or on LinkedIn.

Al Rabil started Kayne Anderson Real Estate from scratch in 2007 and built it into an emerging juggernaut. He and David Selznick built a cash machine, and it shows off everything that makes real estate investment platforms attractive:

• Differentiation. Run out of Boca Raton, Kayne made its name in medical office, senior housing, and student housing. A different path than the coastal office crowd.

• Growth. The first fund raised $136 million. The latest, KAREP VII, closed at $5.12 billion in May 2026, oversubscribed against a $3 billion target and 86% larger than the fund before it.

• Big margins. EBITDA margins run around 50-60% today, on a path to 65-70%.

Five weeks after that record close, Kayne sold. In an uncertain market, Rabil and Selznick had two options:

• Option 1: Clip ~$100 million a year in profits as a medium-sized platform, let a billion-dollar net worth ride on the paper value of the firm, and pray for continued outperformance.

• Option 2: Take a $759 million cash payday today, clip strong comp going forward, potentially earn another ~$344 million in earnouts, and still pray for continued outperformance.

They chose Option 2.

This article explains why they, unlike most real estate investment managers, had the ability to sell at a big number, and what the sale means for the rest of the space. This deal is more complicated (and more interesting) than the headlines suggest, with buried signals for every other investment manager.

Inside the Kayne fee machine

If you were building a real estate investment manager, what would you rather have: a big perpetual fund or a series of closed-end funds? Kayne Real Estate has both.

Kayne Anderson Core Fund (KACORE)

KACORE is Kayne Anderson Real Estate’s ~$4 billion open-end, perpetual core fund, launched in 2017. It owns stabilized, income-producing real estate in Kayne’s specialist sectors, medical office, senior and student housing, and storage, with room to put up to roughly 10% of capital into development and value-add. The fund targets a 9–10% net total return, with about 4–6% of that coming from income.

Structurally, it’s an evergreen, NAV-based vehicle: no fixed fund life, capital comes in and out through a contribution and redemption queue, and it runs around 34% leverage. In short, it’s the stabilized, permanent-capital way to own Kayne’s demographic-driven sectors, built for steady income rather than opportunistic upside.

At KACORE’s fee schedule (see below from a pension fund pitch), $5 billion in net assets generates $40-60 million of fees. $10 billion in net assets generates $80-120 million. And $20 billion in net assets generates $170-230 million.

From a platform perspective, this is the beauty of a lower-intensity, open-end vehicle: scaled operating costs. If it takes 5 people to run a $5 billion core fund, how many people does it take to run a $10-20 billion fund? 10? Even at $1-2 million each, operating profit scales substantially. …which helps to explain why platforms love the idea of these open-end vehicles (a topic for another post).

No doubt that KACORE was a desired component of the platform and, if it continues to outperform, could drive meaningful margins in the future.

Kayne Anderson Real Estate Partners (KAREP)

The star of the Kayne Anderson show is KAREP, Kayne’s flagship closed-end, value-add and opportunistic equity series, which launched in 2007 and is now on its seventh fund. Where the core fund owns stabilized assets for income, KAREP goes for appreciation: it acquires, develops, and repositions real estate in Kayne’s specialist sectors, medical office, senior housing, student housing, multifamily, and light industrial, then sells at a profit. It targets a 15-18% net return (18-21% gross), typically using 65–70% leverage over a roughly five-year hold.

Structurally, it’s a drawdown fund with a finite life: investors commit capital, it gets called and invested over a commitment period, and the fund harvests and winds down over about 8–10 years.

It charges a base fee of 1.25%–1.75% on committed capital (1.75% early, stepping down), an 8% preferred return, and a 20% carried interest. The record behind it is the reason it keeps growing: a 15% realized net IRR since inception and mostly top-quartile results across a 19-year track record.

Here’s what Bridgepoint flagged in its Kayne acquisition announcement:

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So what happened?

Let’s pop the hood and see if we can reverse-engineer the answer.

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Here’s what we’ll cover today:

• Compare the portfolios

• Compare the balance sheets

• Compare income quality

Here’s another Blue Owl fund:

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

It’s probably not the loan book

👨🏻‍🔬 Remember your high school science class (tbh, I blocked mine out, but maybe you were less traumatized)? You start with the simplest hypothesis and try to disprove it. In this case, the obvious explanation is that one fund simply owns worse loans.

Whelp, based on publicly available information, that doesn’t appear to be the case:

If you stopped your diligence here, you’d probably conclude these funds should behave similarly under stress. Many of the portfolio metrics are remarkably close.

Even software exposure (the one thing everyone is panicking about right now) isn’t nearly as different as the headlines suggest. Oaktree actually discloses more software exposure: 18% vs 14% in OCIC (more on that later).

I was apparently single-handedly responsible for datacenter demand on July 4th (the day I’m writing this), because I compared the holdings of both funds for your enjoyment.

Both funds even own the same problem child: Pluralsight. (That one's still lingering on the books. I should probably do another write-up) - I first wrote about it here, then here:

Even fundraising tells the same story. The two funds expanded almost in lockstep through Q4 2025:

If this were only about the loans, we’d probably stop here. But that’s where the story gets interesting:

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That post told you what to look for. This one tells you what goes wrong.

Romain is back with five mistakes GPs make on operational value creation. These mistakes are often not caught until the marks deteriorate. But fear not, dear reader, Romain provides concrete takeaways on how to catch such mistakes earlier.

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About the author

Romain is a managing director at GP-Score, which he co founded with a retired LP and two former seasoned buyout executives.

He brings 25 years of operational experience, both as a performance improvement consultant for portfolio companies (AT Kearney, Alvarez&Marsal, FTI, and others) and as a Comex member in a PE-backed SaaS group. His functional area of expertise is B-to-B Sales and Marketing. You can email him at romain@gp-score.com, or find him on LinkedIn.

Invest in private equity? Start here:

Let’s start with this: a GP who never makes mistakes is a GP who isn’t trying hard enough to improve the EBITDA of its portfolio companies. So mistakes are fine as long as you don’t repeat them and you actually learn something. I have picked out a handful of mistakes we have seen over the years. Beyond the obvious ones, I focused on five that aren’t necessarily easy for LPs to spot.

1. Too much confidence in sector knowledge or playbooks

How many times have we heard PE managers say “We’re sector experts, that lets us move faster and do better, it’s an edge over competitors” or “We have a great playbook for our portfolio companies in the [ ] sector”?

Unfortunately, sector expertise is a dangerous asset. It tends to blind the expert, convince them they already know enough, and hide what they actually don’t know. Case in point: did Thoma Bravo’s software expertise stop them from losing five billion on Medallia?

Operational value creation is a craft, not an industrial, standardized process. Sure, knowing a sector is never useless, whether it’s SaaS or medtech, but every portfolio company is different: different context, different market, different management, and the potential levers for action are so numerous that the GP really needs to take the time for a proper, thorough diagnostic.

The inconvenient truth is, an outside consultant is often sharper than an in-house “expert,” whose knowledge erodes fast and stays anchored to what they learned at four or five companies, while the consultant will have seen far more situations.

What should LPs take away?

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Every other week, we send a quick digest on what’s catching our eye across private markets.

Before we get into it, chart of the day:

The chart shows you the evolution of PIK usage as the cycle progressed. Total PIK usage is up since 2021, but what's more interesting is "bad PIK" rising as a proportion of PIK loans. This, folks, is mostly distressed borrowers kicking the can. In theory, when more borrowers become distressed, markdowns should follow.

In Q1 2026, we saw the other shoe drop: broad-scale markdowns across the traded and non-traded BDC universe. If you missed that post, you'll find it here.

Accredited Insight delivers the LP’s perspective on private credit, private equity, and CRE, drawing on hundreds of deals, and thousands of conversations. Paid subscribers gain access to our database of over 40 case studies and articles on everything from evergreen funds to due diligence (the kind of analysis that tells you what the GP pitch deck left out).

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Today’s lineup:

1️⃣ Private equity is living its version of Groundhog day
2️⃣ Private credit: redemptions are up (but not for all funds)
3️⃣ Commercial real estate: cap rates are stabilizing (two cheers for that!)

Private Equity

1. Groundhog Day

Private equity entered 2026 feeling surprisingly optimistic: tariff fears had faded, the IPO window looked cracked open, deal activity was picking up. For a brief moment, it seemed like the industry might finally escape the liquidity drought that has defined the last three years.

Then came “SaaSpocalypse”, redemption stress across private credit, and a war.

Bid-ask spreads widened and exit momentum stalled yet again. PwC data shows H1 deal volume down 34% year-over-year while total deal value rose nearly 10%. In other words, fewer deals are getting done, but the ones that do happen are attracting a disproportionate share of capital.

Bain calls this the Groundhog Day scenario: another year where recovery is always six months away.

The math became harder: a decade ago, a buyout deal could generate a 2.5x return with roughly 5% annual EBITDA growth. Leverage was cheap, entry multiple were reasonable, and multiple expansion did a lot of lifting.

Today, with entry multiples for larger buyouts running around 11–12x EBITDA and debt costs at 8–9%, that same 2.5x outcome requires closer to 10–12% annual EBITDA growth. Bain's shorthand: "12 is the new 5."

Tech was hit particularly hard. Deal value in the sector fell roughly 70% from Q4 2025 to Q1 2026. Private equity software portfolios also took marks lower, though nowhere near the public market bloodbath. Most reported declines were in the high-single-digit range.

Side note: I recently joined the Hedgeye podcast to discuss private markets, and the conversation touched on what made PE and the Swensen model so successful back in the day, give it a listen :)

Listen to Hedgeye Podcast

☝️I wrote this a year ago, my opinion has not changed.

2. Fundraising

Global private capital fundraising is on pace for roughly $1.3 trillion in 2026, the weakest year since 2016. Buyout’s share of total fundraising is hovering near multi-year lows.

The problem is simple: exits haven’t recovered. Bain estimates it takes 12-18 months of sustained exit activity before fundraising meaningfully improves.

3. What Institutional LPs Think

From the latest ILPA survey:

• 47% of LPs expect to reduce exposure to large-cap PE managers over the next 12 months

• ‼️ 84% are less likely to invest with managers that raise significant amounts of retail capital

• Only 21% view continuation vehicles as a preferred source of liquidity (no surprises here)

CVs are a fun topic. Here’s your primer:

And they are starting to show up in evergreen funds:

Private Credit

1. Redemptions Are Up

Q2 redemption data is coming in, and the queue isn’t getting shorter:

• Apollo Debt Solutions capped withdrawals at 5% after investors requested redemptions equal to 16.8% of NAV, up from 11.2% in Q1.

• Morgan Stanley’s North Haven Private Income Fund saw redemption requests reach 11.6% of NAV and fulfilled just 43% of them.

• Ares Strategic Income Fund said it had received redemption requests worth 14.4% of the vehicle (up from 11.6% in Q1). The list goes on…

The notable exception was Oaktree Strategic Credit Fund, which reported redemption demand of just 4.5% and honored all requests in full.

None of this should come as a surprise, of course: there is no penalty for requesting a redemption, and for advisers, it’s a classic prisoner’s dilemma with only one rational solution:

What's more concerning is the portfolio markdowns. When a fund marks assets down, NAV per share drops. Lower returns beget more redemption requests. I don't expect redemptions to slow materially in Q3, but time will tell.

2. The Obvious Trade

Mainstream media is catching on to the most obvious trade under the sun: listed BDCs currently trade at a median discount to NAV of roughly 25%, arguably reflecting concerns that private credit valuations have further to fall. Meanwhile, many non-traded vehicles continue to offer liquidity at stated NAV (Bloomberg).

The trade is straightforward in theory: redeem from the non-traded vehicle at NAV and rotate into the publicly traded equivalent at a substantial discount. The only trouble is, the article is about six months late.

I wrote about this back in October (hehe):

The catch, of course, is that “redeem at NAV” only works if you can actually redeem. If your request is prorated to 43% this quarter, the trade may take considerably longer to execute.
(Yes, there are meaningful differences in fees, leverage, and portfolio construction between listed and non-traded vehicles, but not meaningful enough to ignore the obvious)

3. Insurance and Private Credit

Away from the redemption headlines, a new report from Clearwater Analytics highlighted a less obvious risk lurking in insurance company portfolios.

Median allocations to private credit among U.S. life insurers have more than doubled since 2021, reaching roughly 9% of total assets.

More interesting was Clearwater’s finding that an estimated 10-20% of insurers with LP stakes in private credit funds also hold debt issued by those same funds. In other words, they’re investing in the fund and lending to the fund at the same time (“cross-contamination” is what Clearwater calls it). WSJ’s article on the subject is here.

3️⃣ Commercial Real Estate

From Yardi’s latest data:

• Multifamily remains oversupplied. National rents posted modest growth in the first half of 2026, but nearly 1.3 million units remain in lease-up.

• The recovery is highly market-dependent. Gateway cities and lower-cost Midwest markets are outperforming, while many Sun Belt markets are still digesting a wave of recent deliveries.

• Supply relief is coming, but slowly. New apartment starts fell more than one-third from their 2022 peak, yet developers are still expected to deliver roughly 450,000 units annually through 2027, extending the supply overhang.

• Debt markets are open. Fannie Mae, Freddie Mac, banks, insurance companies, debt funds, and CMBS lenders are all actively lending.

• The bottleneck is pricing. There is plenty of debt capital available, but not enough sellers willing to transact at current market-clearing prices.

Last (but not least): CBRE cap rate survey

Cap rates are stabilizing, total CRE transaction volume was up 19% in 2025, and nearly all respondents believe that cap rates have peaked (you’ll find data on cap rates for other asset classes and geographic locations here)

If you invest in real estate deals or funds, you’ll find this helpful:

And finally, this SEC panel on the retailization of alternatives is worth a listen (discussion starts around 22:00). (you should subscribe to his newsletter), Jason Zweig (whose column you undoubtedly read), Stephen Deane, Joseph Sheirer, and Kevin Gannon discuss whether retail investors truly understand the risks, liquidity constraints, and valuation challenges associated with semi-liquid private market investments.

Thanks for reading! As always, if you have any suggestions, reply to this email, leave a comment, or hit me up on socials (unhinged me on X, slightly more filtered me on LinkedIn). Have a great week!

-Leyla

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P.S. New here?

Here’s where you’ll find the full archive (somewhat organized):

P.P.S. Meme of the day

Public BDCs took a 3.3% NAV hit, according to Raymond James. Public markets did not welcome the news with open arms: BIZD, VanEck’s BDC ETF, is down 4.6% since March 31.

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Today, I wanted to take a look at the performance of large non-traded funds. I pulled data on the seven non-traded private credit evergreen funds, and the markdowns ranged from roughly -1.6% to -4.2% of beginning NAV.

These markdowns occurred across different managers, different underwriting teams, different sectors, and different borrower bases. And, like synchronized swimmers, all of them moved in the same direction at the same time:

For eight consecutive quarters in our sample, unrealized gains and losses fluctuated within a relatively narrow band. Then Q1 2026 arrived. It seems the industry reached the same conclusion simultaneously, and valuations were adjusted.

➡️ There are some in-the-weeds accounting mechanics you really need to understand about how defaults flow through financial statements. Read this:

But Why Q1 2026?

The obvious question is why these markdowns happened in Q1 2026 rather than Q3 2025 or Q4 2025. After all, most of the underlying stress wasn’t new:

Read more

For years, it behaved like one: assets grew at a 46% CAGR, and the fund went on to become one of the largest private credit vehicles available to ordinary investors. It consumed capital the way my teenagers consume groceries (and other resources): continuously, and without remorse.

I ended that piece with a question: is the machine still eating, or is the planet starting to eat back?

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The annual report is out, and the May repurchase results are in. TL;DR, friends: the planet is eating back.

Here’s the first part of the series:

Here’s what we’ll cover in today’s update:

• Redemption activity

• What’s contributing to the decline in NAV per share

• What’s happening with the portfolio

Let’s get into it. (Pour the coffee. You’ll want it.)

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

The Buyers Left

When I last wrote about CCLFX, the headline was a single oversubscribed repurchase offer. Investors asked to pull ~14% of the fund. Cliffwater honored about 50% of those requests. At the time, it wasn’t clear whether that was a one-quarter panic or the start of a trend. (Spoiler: it was a trend).

We now have more data points. Here’s every repurchase offer since the start of 2024:

Look at what the fund did with its gate as the pressure built. In March, it went all the way to the 7% ceiling (the maximum it can repurchase before it’s legally required to prorate). In May, with more people asking to leave, it pulled the cap back down to 5%.

But redemptions are only half the demand story. The other half is what the people who stayed decided to do with their money:

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The CEO’s opening keynote was centered on two things: AI and public/private markets convergence (if you missed it, I did an interview with him on this very topic).

From the sessions I’ve attended, the message is pretty consistent: private assets are becoming more accessible, but there is work to be done on structuring them in a way that meets investor liquidity needs and sets the right expectations. One change everyone seems to agree on: investors need more transparency.

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This question came up repeatedly during the conference: do investors get compensated enough for the illiquidity of some products?

The following chart is from the Morningstar State of Semiliquid Funds report:

The chart on the left shows the fee waterfall of Blackstone Private Credit Fund (BCRED). The chart on the right shows the same for an SPDR ETF. Net result: the more liquid option generated 8.18% (vs. 7.38% for BCRED) net of fees for FY2025.

Let that sink in for a second. The liquid, low-cost alternative outperformed BCRED net of fees during FY2025. These aren't identical portfolios, but the question remains: how much illiquidity premium are investors actually receiving after fees?

So, since evergreens are the topic du jour, I thought I’d give you the lay of the land. This is Part 3: how big the market is, who the players are, and how it’s shaping up.

In Part 1 we covered how these funds are structured (incentives, liquidity mechanics, and valuation.)

In Part 2 we covered how they perform relative to drawdown funds (and what makes them an attractive option).

Disclaimer: This article is for educational purposes only and does not constitute investment advice, tax advice, or a recommendation to invest in evergreen vehicles. Consult with qualified tax and financial professionals before making any investment decisions.

How Big is the Pie?

The semiliquid (or “evergreen”) fund market is approaching $600 billion in assets, more than double its size at the end of 2022. The growth was driven, overwhelmingly, by private credit.

Vintage year, you ask?

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The green is what investors got out. The red is what they asked for and didn't get.

When I published the original piece, Apollo Diversified Real Estate Fund was a $3.7B interval fund investing in third-party institutional private real estate funds, selected with help from Aon Investments, plus a publicly traded REIT sleeve managed by CenterSquare.

Read it here, if you missed it:

The pitch was straightforward: institutional-grade real estate access, multi-manager diversification, single investment. The fund had a redemption queue forming, distributions that weren't covered by net investment income, and three years of net outflows. I flagged all of that.

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‼️ Since then, the fund has shrunk, and the liquidity picture has deteriorated further. But that's not the most interesting part. The interesting part is what the fund did about it: on June 2, it filed form 486BPOS to become quite a different animal (you’ll find a table with summary of changes at the end of the post).

We've seen a fund in a similar position take a scenic route: Bluerock Total Income+ ended up listing publicly. Incidentally, there is a small BPRE position on the books of Apollo Diversified RE fund.

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

The Fund Changed. You Didn’t Vote

Let’s start with the big change.

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And like Hokusai's famous woodblock, once you see the boats underneath, your mind can't help but wonder whether they are built to handle what's about to hit them.

A lot of brain cells were wasted on the debate around whether individual investors should have access. That boat has sailed (I’m full of terrible puns): access is rapidly “democratizing”. The better question is whether the vehicles being built for said retail investors still behave like private equity at all.

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I’ve been writing about the structural downsides of evergreen vehicles for a while (the liquidity mismatches, the inflated IRRs, the layered fees, the fund-level opacity that leaves investors guessing at what they actually own).

Today's guest post pulls those threads together from a different angle. The authors, Benjamin Forestier, Affiliate Professor in Investment Banking and Private Equity at École Polytechnique, who trains professionals across PE funds, M&A, and leveraged finance teams in France and abroad, and Claudia Zeisberger, Professor at INSEAD, former KKR advisory committee member, and author of Mastering Private Equity, make this case: retail investors aren't being given private equity. They're being given something that looks like it.

The argument is for getting the design right, so that the product retail investors are buying still reflects the mechanics that make this asset class worth owning in the first place.

-Leyla

Before we get into it, a special thank you to the academics and students in the audience!

30% off for .edu emails

Private equity has been one of the most reliable wealth-creation engines of the last three decades. Now it is being opened to retail investors. The ambition is right. The structures, in many cases, are not and need work.

What is being sold as democratization is often something different: private equity redesigned for distribution, with illiquidity, patient capital, and aligned incentives gradually engineered out of the model. Private equity closed end funds work because of those constraints; they fit the underlying assets which are illiquid by design.

Why offer Retail investors a simplified version, rather than the real thing?

Illiquidity, misunderstood

Illiquidity is often framed as the main barrier to retail access. In practice, it is one of the reasons private equity works as an asset class in the first place. It allows investors to stay invested through cycles, gives companies time to execute, and removes the constant pressure of mark- to-market decisions. Institutional investors do not try to eliminate this constraint but build portfolios around it.

Retail structures have taken a different approach. Evergreen vehicles —which are open-ended structures that promise periodic redemptions while remaining invested in illiquid assets — are the most common form. At first glance the logic seems sound. In practice, it depends on market conditions holding. Liquidity in these structures is not absolute/ guaranteed ,it is managed and highly contingent on market conditions. This becomes visible when the cycle turns: If and when inflows slow and financing tightens, redemption requests increase at the same time as exit opportunities decline.

Primer on evergreens:

At that point, the structure is forced to choose: sell assets at a discount in a hurry or restrict liquidity. In most cases, gates typically follow to avoid forced sales at significant discounts.

What initially looked like flexibility starts to resemble a clear duration mismatch between assets (illiquid by nature) and liabilities (short-term redemption requests). Investors are holding long-duration assets while expecting short-term optionality, something that is difficult to manage in practice without gating mechanisms or holding cash buffers that dilute returns.

The irony is that many retail structures are attempting to manufacture liquidity from fundamentally illiquid assets. They are not eliminating the problem, they are simply relocating it into the fund structure itself. In benign markets this remains largely invisible. When markets become stressed, it reappears through gates, delayed withdrawals or forced asset sales.

The closed-end structure has endured for decades, and for good reason. Capital is committed, deployed over time, and returned when assets are realized. There is no promise of interim liquidity—and therefore no need to withdraw it later. For retail investors, this is less a constraint than a form of clarity. Illiquidity is easier to accept when it is clearly stated than when it is only visible in stressed conditions.

Here’s why you want to watch liquidity, and how to do it:

IRR is a number, not the full picture

IRR is usually the first number investors see, and the one most emphasized during fundraising. The difficulty is that it is highly sensitive to timing, which makes it relatively easy to influence without changing underlying performance.

Two tools are commonly used in fund financial engineering:

1. Subscription lines delay capital calls, effectively shortening the measured investment period.

2. NAV-based financing can generate early distributions without requiring exits.

In both cases, the result is a higher IRR. From an economic standpoint, however, very little has changed. The same assets are held, over the same horizon, with the same operational outcomes. What shifts is the timing of cash flows. Institutional investors adjust for this automatically. The advisors and private banks that direct retail and high- net-worth capital into these funds typically cannot — the data required to make that adjustment is rarely disclosed. The effect is economically modest but psychologically powerful. Investors can be shown stronger-looking performance numbers without any corresponding improvement in the underlying investments.

A more grounded approach is to look beyond IRR. Metrics like DPI and MOIC, particularly on a deal-by-deal basis, bring the focus back to realized outcomes and capital efficiency. Calling capital when investments are made and distributing cash when operational value creation is genuinely realized does not optimize presentation. It makes the numbers easier to interpret and easier to trust for non-qualified investors. Private equity should create value through better companies, not through better cash-flow choreography.

Same assets, same table

Access is often discussed as though exposure alone were enough. In private equity, however, the economics of the structure matter just as much as the assets themselves. Retail investors are frequently invested through feeder funds, funds of funds or parallel vehicles. These provide access to similar underlying assets, but not always under the same conditions. Differences can emerge in fees, governance, and visibility. They are not always obvious at the outset. Over time, however, they tend to accumulate.

Institutional investors, by contrast, typically sit directly in the main fund. They share the same entry price, the same reporting framework, and the same governance environment. Retail investors should not simply gain access to the same assets. They should gain access to the same economics. Whenever possible, capital should sit alongside the investors for whom private equity was originally designed: pension funds, endowments and family offices. Shared economics naturally create shared discipline. Pricing becomes easier to justify, reporting more consistent and incentives more transparent. When they do not, differences emerge gradually, but they do emerge. In private equity, alignment is less about intention than about structure.

And here’s how to do due diligence on GPs:

Seeing what you own

Private equity investors are owners of companies. Yet for many retail investors, that ownership can feel abstract. Reporting is often concentrated at the fund level, with limited detail on individual portfolio companies.

As a result, performance is understood in aggregate, rather than through the underlying drivers. Institutional investors approach this differently. They receive regular company-level information,not to manage operations, but to understand how value is being created. Retail investors do not need full operational visibility. But they do benefit from access to core information: revenue evolution, profitability, cash generation, and basic financials.

This information is already produced. The challenge is not availability, but how it is shared. Without it, performance tends to be interpreted through high-level narratives. With it, investors can follow progress more directly.

Opacity is often defended as an unavoidable feature of private markets. In reality, sophisticated institutional investors already receive much of this information. The question is not whether the information exists, but why it should stop at the retail gate. Transparency does not remove complexity. It makes it more tangible.

Ownership becomes easier to understand when it is visible.

Your best bet at gaining more visibility is reading the footnotes to financial statements. I know, for all some of us it’s a pain. Please do it anyway:

Fees in a lower return world

Fees have long been treated as a given in private equity. But they were designed in a different context when funds were smaller, competition was lighter, and return dispersion was wider. That environment has evolved. Funds are larger, capital is more abundant, and entry valuations are higher.

As a result, expected returns, particularly in certain segments, are under more pressure. In that context, fees take on greater importance. What used to be a secondary consideration becomes a meaningful driver of net outcomes.

For retail investors, the picture is often more complex. Access frequently comes through additional layers, each with its own cost. The combined effect is not always immediately visible.

Institutional investors, meanwhile, tend to negotiate. They benefit from fee adjustments through side letters, co-investments, and governance rights that improve overall economics. The result is a difference in net returns, even when underlying assets are similar.

Democratization should not mean creating additional layers of fees between investors and the underlying assets. If retail investors systematically pay more for essentially the same exposure, broader access risks becoming a transfer of value rather than a creation of value.

Much of the gap traces back to how products reach investors in the first place. In most markets, private banks act as distributors — compensated by the funds they sell, not by their clients. That is a conflict of interest. An advisor paid by the product is not advising the client. For the economics of retail access to improve, that incentive structure has to change.

A more balanced approach would reflect the current market environment. Management fees can scale with fund size. Carried interest can be more clearly linked to outperformance, with lower participation around the hurdle and stronger incentives for genuine excess returns.

Equally important, unnecessary layers could be reduced if regulatory thresholds for direct investing were revisited (reducing reliance on feeder and fund-of-funds structures). Fees rarely dominate the conversation in strong markets, but they compound over time. And in private equity, alignment is ultimately reflected in how value is shared between the GPs and the LPs.

Fund-of-funds warrant a special mention where fees are concerned:

Designing access without changing the assets

Private equity does not outperform simply because it invests in private companies. It has historically outperformed because its structure forces patience, alignment and long-term ownership.

Many of today’s retail products attempt to preserve the appearance of private equity while softening these constraints. Yet these constraints are not flaws in the model. They are the model.

Opening the asset class to a broader investor base is a worthwhile objective. But democratization should not come at the cost of redesigning private equity into something fundamentally different. Retail investors do not need a simplified version of private equity.

They deserve the real thing.

👉 New here? Check out some of our popular topics to get started:

• private credit

• private equity

• commercial real estate

And here’s the full table of contents:

Before I launch into my thoughts, the usual reminder: my mission is to make you a better investor by telling you how the sausage is made (teach the man how to fish, and all that). It’s not to tell you which funds to put your money into (you have an adviser for that, share this article with them).

What follows is emphatically NOT investment advice, and like Vincent Vega in Pulp Fiction, I won’t show you exactly what’s in the suitcase. But I hope you are happy (you can make me happy by subscribing below).

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Personally, I don't see many obvious bargains today. The opportunities I do see generally fall into two buckets: assets that have already repriced and managers deploying fresh capital into today's market rather than managing yesterday's mistakes.

I'll show you what that looks like across private equity, private credit, and real estate.

If you want some case studies on actual funds, here are a couple to get you started (one private credit, one private equity):

Nothing contained in this newsletter constitutes investment advice, a solicitation, or an offer to buy or sell any security or investment product. The views expressed are those of the author alone and are for informational and educational purposes only. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. Please consult a qualified financial adviser before making any investment decisions.

Private Equity

Quick recap of our prior episodes:

• Over the past decade PE funds raised enormous amounts of capital and rapidly deployed it. A lot of that capital went into software, healthcare, and fintech at double-digit EBITDA multiples.

• The problem is that those multiples haven’t come down much (while rates increased). Across most industries, things are still expensive and marks on existing investments have barely moved. PE in general is not cheap.

👉 A hill I will die on: basis is the best predictor of future outcomes. Buy something cheap, and you have more upside. Buy something expensive, and you’re depending on multiple expansion or operational miracles to bail you out.

So where does that leave you?

Primary funds

If you're allocating to a new primary fund, you want a specialist GP: someone who knows one industry deeply and buys deals only in that industry.

And here’s why: generalist GPs are competing with everyone else for the same assets, and they're still paying peak multiples to win. Specialist GPs in less-trafficked sectors are likely seeing less competition and possibly buying at meaningfully lower entry points (goes without saying, do your DD).

📌 You want fresh deployment, and a GP with extensive experience in one sector. These managers exist, but they're harder to find than the marketing decks suggest.

Secondaries (drawdown funds):

Well-capitalized secondaries buyers are going to have real opportunities to acquire good assets at a discount. The supply of motivated sellers is growing: LPs who over-allocated in 2021-2022 need liquidity, distributions are near historic lows, and the exit environment has been slow. Find the GPs with capital ready to deploy into that dislocation.

⭐️ Secondaries (evergreens):

I’ve written extensively about how evergreen secondaries funds work, so I’ll be brief. The game here is simple once you see it: you want to be the first dollar in, ideally in a fund that will deploy a significant portion of its NAV in the period immediately following your investment.

Here’s how the mechanics work:

A simple example: say a fund has deployed $3B between 2021 and 2023. The underlying assets haven’t been marked down much (private valuations are a work of art). You invest today at stated NAV. But stated NAV reflects assets that were acquired at peak multiples, and the discount on acquisition is already reflected in the NAV you paid.

And guess what? If there is a markdown, you’ll ride it down despite not being there to bask in the glory of unrealized gains.

More on the topic here:

By contrast, if you’re among the early investors in a newer vehicle that’s actively deploying fresh capital into today’s deals, you get to participate in what’s affectionately known as “NAV-squeezing”. The math is straightforward. Be dollar number 1. Don’t be dollar number $2,389,098,357.

Here’s a case study on a mature PE fund (according to FT, redemptions are likely to be capped):

‼️ Again, not investment advice, but "In-N-Out" appears to be quite a strategy with new evergreen secondaries: be the first dollar in, and among the first dollars out, while the fund is rapidly deploying fresh capital and marking positions up. The window between early deployment and portfolio maturity is where outsized returns are.

Private Credit

The golden child of alts has handed the baton to infrastructure, but it is throwing a fit on the way out (like a toddler).

A quick note: “private credit” is a broad term. It means loans originated outside the banking and public markets ecosystem. This is anything from commercial mortgages to BNPL burrito loans. The vast majority of what’s available to individual investors is middle-market direct lending: loans to privately held companies, typically originated by PE sponsors to finance acquisitions. That’s our focus (if you ask nicely, I’ll write a primer on all the different flavors of private credit).

On prior episodes:

• Boatloads of capital were raised between 2020 and 2025 and got deployed.

• The borrowers look a lot like the PE darlings above (software, healthcare, fintech). That’s because PE bought those companies and saddled their balance sheets with acquisition debt.

• The official default numbers are still low, and loan valuations are holding. But the cracks are showing: PIK income is up as a percentage of total income, some funds are quietly taking markdowns, and several interval funds have hit their redemption caps.

It’s still TBD whether the losses ultimately materialize. Public investors, however, are clearly demanding compensation for the possibility:

Here’s a case study on how markdowns work in financial statements:

👉 Which brings us to the trade. Most public BDCs now trade at a meaningful discount to NAV (the sector average is around 0.78x, meaning you’re buying a dollar of private loans for roughly 78 cents). Non-traded private credit vehicles are still redeeming at NAV. Well, the ones that are still redeeming, that is...

So the trade is: redeem at NAV from the non-traded vehicle, and buy the same underlying exposure in the public market at a discount.

⚠️ BUT (you knew it was coming, didn’t you?) you want to make sure the discount is sufficient for the 2021-2023 vintage exposure. Those portfolios were underwritten at peak, to borrowers carrying heavy leverage, in sectors that are now under pressure. The discount might look attractive, but you could be buying into a NAV that hasn’t finished correcting.

What you want instead is a public BDC with: post-2023 vintage originations, a first-lien heavy portfolio, low non-accruals, and ideally an internally managed structure (which better aligns manager incentives than the externally managed alternative). Think of the discount as your margin of safety, not necessarily upside.

A second option worth watching: drawdown distressed debt funds. Several are actively raising right now, and they’re positioned to buy portfolios of good-quality loans at a discount (potentially from the same evergreen vehicles that are currently working through redemption caps).

Real Estate

Look at the chart below and focus on the two ends: Q4 2021 and Q1 2026.

Q4 2021: peak FOMO (=fear of missing out). Multifamily deals traded at 4% cap rates, deals attracted 45 bids, and long-term financing rates were low enough that the math still penciled (for those who elected long-term financing). Many of those deals were financed with floating-rate bridge debt, which at the time seemed fine.

Between then and Q1 2026, the 10-year Treasury yield rose by nearly 3%, but core private real estate cap rates, as tracked by NCREIF’s ODCE index, rose by less than 1%.

Put differently: the cost of financing real estate went up sharply, but the price of real estate barely moved.

Public REITs, by contrast, repriced in real time. Implied cap rates on listed REITs rose from around 4.45% to nearly 6% over the same period (blue line in the same chart). And public REITs, importantly, carry lower leverage and lower cost of capital than most private deals.

Don’t know what a cap rate is? Read this:

What to avoid: existing private real estate fund portfolios, particularly non-traded REITs with large legacy 2021-era acquisitions on the books. Those assets are still marked near peak. Did you see my point above about the cost basis? With redemption queues, some of those vehicles don’t have the luxury of deploying new capital.

What’s more interesting:

• Listed REITs: you can enter at meaningfully higher implied cap rates than the private market is offering for comparable assets. Yes, there is little love for listed REITs; there should be even less for their non-traded counterparts.

What else is interesting:

• Private value-add deals: good value-add opportunities are few and far between, but they exist. There will be some forced sellers: for example, some over-levered 2022 deal with the lender finally throwing in the towel. (The ones we’ve seen so far were not screaming bargains). Either way, don’t expect high current cash flow. You’re buying for basis and exit multiple, not yield.

• Off-the-beaten-path locations and asset classes: higher on the risk spectrum, but should offer higher expected returns. Again, experienced specialist GPs will likely outdo generalist GPs.

• If you are dead-set on allocating to core CRE, new drawdown funds is where I’d focus.

Here’s a case study on a newer secondaries fund:

TL;DR

The common thread is the vintage.

Today, I think vintage selection matters almost as much as manager selection (this, obviously, only applies to evergreen vehicles). In many corners of private markets, the question isn’t whether an asset is good or bad. It’s whether it was acquired in 2022 or 2026.

That’s an oversimplification, of course. But if I had to summarize what I’m paying attention to today, that’s probably the closest thing to a north star.

Thank you for reading!

As always, feel free to share your ideas in comments (feel free to argue, too! I like a lively discussion)

— Leyla

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🩺 The early symptoms are easy to miss. A redemption rate that doubles. A credit facility that goes from zero to $711 million in six months. A net cash inflow that quietly reverses into the negative zone for the first time in nine years.

Partners Group Private Equity (Master Fund), one of the oldest and largest evergreen PE vehicles in the wealth channel, is having that kind of moment.

Here’s a fund from the same asset manager that’s youthful and energetic:

Today we’ll take a look at:

• The usual: how it works, what’s in it, and what it costs

• The less usual: where returns come from (and how that’s changed)

• And finally: whether a $16 billion mature evergreen fund still makes sense when you have alternatives

💡 If you missed the UNREAL Gains Part 1 and Part 2 discussion, you’ll find it enlightening.

Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.

The Pitch

Partners Group Private Equity (Master Fund) is one of the largest evergreen private equity funds available to wealth-channel investors, with ~$16 billion in net assets as of September 2025.

The value proposition is straightforward: access to institutional private equity through a semi-liquid structure. Investors gain exposure to a globally diversified portfolio of direct investments, secondary acquisitions, and primary fund commitments that would typically be difficult to access individually.

Liquidity is offered through periodic tender offers, subject to Board approval and available fund liquidity.

Here’s how tender offer funds differ from interval funds:

What’s in the Fund

The portfolio is broadly diversified across investment types, with exposure to:

• 417 direct investments

• 223 primary fund commitments

• 81 secondary investments

• 110 listed investments

As of September 30, 2025, the portfolio looked like this:

The fund does not provide a detailed industry breakdown. Based on management commentary and the schedule of indirect investments, technology and healthcare appear to be among the larger sector exposures, though precise allocations are difficult to determine.

One disclosure worth noting is that approximately 30% of the portfolio consists of primary and secondary fund investments valued using the NAV practical expedient. In other words, Partners Group is largely relying on valuations reported by underlying fund managers, with adjustments made when deemed appropriate.

Visibility into the underlying holdings for that portion of the portfolio is limited.

Here’s how that works:

Roughly 90% of the portfolio is classified as Level 3 assets. That’s not unusual for private equity: most portfolio companies do not trade on public exchanges, so observable market prices generally don’t exist. It does mean, however, that reported values are heavily dependent on valuation models and assumptions.

Which brings us to the most transparent part of any evergreen fund: the fee structure.

Fees

Like most evergreen private equity vehicles, the Master Fund has multiple layers of fees. Some are visible in the financial statements. Others are embedded within underlying funds and never appear in the reported expense ratios.

Here’s what investors can see:

1️⃣ Management Fee

The management fee is 1.50% annually, calculated monthly on the greater of:

• NAV, or

• NAV less cash, plus unfunded commitments

Because unfunded commitments are included in the calculation, the fee base can exceed NAV. The effective management fee is capped at 1.75%.

2️⃣ Incentive Fee

The incentive fee is 10% of net profits, calculated and paid quarterly.

• Importantly, net profits include both realized and unrealized gains.

• There is no hurdle rate.

Instead, the fund uses a “New Loss Recovery Account”. After periods of negative performance, incentive fees are paused until prior losses are recovered.

❗️In practice, this is not a hurdle rate. It does not require investors to achieve any minimum return before the manager can participate in gains. It simply delays fee collection after drawdowns, and then resets once performance turns positive again.

Class A investors pay an additional 0.70% annual distribution fee on top of the above, plus a potential one-time placement fee of up to 3.50%. Class I is not subject to either.

In dollar terms, here’s what the fee structure has generated over time:

And there’s something else worth holding in mind before we move on.

Since FY2019, the fund has generated negative net investment income every single year.

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Every other week, we send a quick digest on what’s catching our eye across private markets.

Before we get into it, a quick shameless plug. I recently joined Morningstar’s Investors First …

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• Buy secondary interests at a discount

• Mark them immediately to sponsor-reported NAV under ASC 820’s practical expedient (Day One mark-ups)

• Report the unrealized gain before a single company exits

• (Collect fees on it too, in some cases).

Here’s Part 1, ICYMI:

The economics in the early years can be extraordinary. When a fund has only a few hundred million in assets, every new secondary purchase meaningfully moves the NAV.

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But there is a problem embedded in the structure itself: eventually, the denominator gets too large.

The same $7.5 million instant mark-up that once generated a multi-percentage-point return barely moves the needle once the fund grows past a billion dollars in assets.

So what happens then?

Well, the logical place to look is mature evergreen secondaries funds. The trouble is, our pickings are slim (which made my job easy: there are only a handful of such funds older than 6 years). I picked one early vintage secondary fund with over $1B in assets:

Pomona Investment Fund, launched May 2015, and now ~$1.9B in assets (88% allocation to secondaries as of December 2025).

“Leyla, what in the world are you talking about?” Here’s your primer on evergreen secondaries:

👉 Want some case studies on secondaries evergreens? Here’s Coller Private Credit Secondaries (LINK), Carlyle AlpInvest (LINK) and Partners Group Next Generation Infrastructure (LINK).

The machine still runs

To isolate the effect, I separated all new acquisitions in each reporting period from the performance of the existing portfolio and calculated Day One mark-ups on entry (and by “on entry” I mean in the same reporting period).

Average same-period mark-up on all new secondaries purchased during 2024–2025: ~28%.

Yes, this is an unnecessarily tedious exercise, even if you outsource the tedium to an LLM. And yes, the estimate is derived by comparing initial cost basis to reported fair value in the first filing period for each position, and I ignore some nuances. It is imperfect, but gets us in the ballpark. (If you object, I’ll beat you over the head with a Warren Buffett quote about decimal points).

No, Pomona didn’t make it easier by reporting cost basis neatly. I had to reconcile it from footnotes. This is how it’s reported (I’m going to call out every fund that does it like this. There is no excuse):

Pomona itself reports an average purchase discount of ~21% since inception. If anything, there is an argument for wider discounts in recent periods (rates are higher, more sellers seeking liquidity, etc).

Nothing surprising here, of course: a decade into the life of the fund, newly acquired secondary interests are still being marked up meaningfully and almost immediately after acquisition. And ASC 820 continues to allow that mark-up to flow directly into reported performance.

Here’s a case study on a newer secondaries fund:

But there is a structural difference between a $300M evergreen fund and a $1.9B evergreen fund:

the mark-up may be the same. The denominator is not.

When the fund was small, a single discounted secondary purchase could meaningfully move reported returns. At scale, the exact same economics become diluted across a much larger asset base.

And meanwhile, the existing portfolio keeps aging.

Those older positions are no longer generating fresh Day One mark-ups. They are gradually transitioning into harvest mode: underlying PE funds sell companies, distribute cash, and convert prior unrealized appreciation into realized returns.

Before we get too far in the weeds, I need to remind you that assets in these funds are very illiquid, but the structure allows for periodic redemptions. Read this:

The denominator problem

Let me first illustrate the denominator effect broadly.

Take a $50M secondary purchase at 15% discount (it’ll generate $7.5M in Day One unrealized gains). Here is what that same transaction contributes to Pomona's reported return at different fund sizes:

This is the denominator problem in its simplest form: as fund assets grow, each new mark-up contributes a smaller percentage of total NAV.

The rational response?

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On paper, the idea sounds compelling. Belpointe is structured as a partnership for U.S. federal income tax purposes, meaning income passes through to investors (avoiding corporate-level taxation) while still qualifying for Opportunity Zone benefits. Investors get K-1s like any private OZ fund, but with the added advantage of NYSE liquidity. Put it all together, and you have what was marketed as a powerful tax-advantaged vehicle with unprecedented flexibility.

The reality has looked very different. Since going public, OZ shares have declined 51.8%.

In today’s guest post, takes a closer look at Belpointe OZ and walks through several structural red flags that investors may want to understand before chasing the tax narrative.

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👉 If you're unfamiliar with Opportunity Zones or wondering about the December 31, 2026 tax cliff, we recently published primer:

Speaking of real estate, here’s a post on tax efficiencies in private placement real estate, and another one on phantom income.

-Leyla

About the author:

is a former award-winning physicist and professor who now writes about value investing at Focused Investing, specializing in REITs and energy markets. Since taking control of his portfolio in 2020, he's outperformed the S&P 500 through focused research and disciplined strategy across market cycles.

The purpose of Opportunity Zones, in their present incarnation since 2017, is to incentivize investment in undercapitalized communities. They do this primarily by enabling temporary deferral or permanent exclusion of capital gains produced by investments in those zones. There are details, but they need not distract us today.

So one can invest in property in such a zone, with the hope that enhanced investment throughout the zone will produce a significant increase in value that one can eventually harvest. But one will still owe taxes on current income throughout.

To get around that, why not put the properties in a REIT, so that no taxes are owed at the corporate level? That is what Belpointe OZ (OZ) is doing.

Belpointe present themselves as a real-estate development company with a focus on mixed-use and multifamily properties. They have two properties in lease-up and four in pre-development, at a total cost of $1B.

They also describe themselves as a “public Qualified Opportunity Fund,” enabling easier exits for investors. They expect to designate new OZs every 10 years, and are about to transition from OZ 1.0 to OZ 2.0.

But we don’t need to explore the details here, for reasons discussed next.

🚩🚩🚩🚩🚩

There are a bunch of red or orange flags about OZ.

🚩 Red Flag #1. They are externally managed with, as usual, misaligned incentives detailed in their 10-K. The manager gets paid more for increasing NAV, even if this is done by diluting shareholders. NO publicly listed REIT with this structure has performed well for shareholders (to my knowledge, and I’ve seen a lot of them). For me this is a terminal red flag.

🚩 Red Flag #2. They are also what NAREIT labels a “Diversified REIT.” In their 10-K, they describe their investments as

located in qualified opportunity zones for the development or redevelopment of multifamily, student housing, senior living, healthcare, industrial, self-storage, hospitality, office, mixed-use, data centers and solar projects located throughout the United States and its territories.

By far the poorest historical gains among classes of listed REITs have come from the Diversified REITs. There are real benefits to being focused and today the markets respond to that. To be fair, the current investments by OZ are more concentrated.

🚩 Red Flag #3. Their Debt Ratio is 48%, which is too high to support a secure dividend. No quality listed REIT is that high these days. The office REITs tend to run near 50%, and we’ve seen lots of dividend cuts in recent years even among those doing relatively well, as one could have predicted. I recently discussed Why Leverage Often Does No Good.

🚩 Red Flag #4. They are operating at a substantial loss even after adding back in depreciation. They claim that their initial developments are ongoing, that they will refinance at stabilization, and then start paying dividends. They say nothing I could find about what their capital allocation policy will be.

This REIT seems a bit reminiscent of Clipper Realty (CLPR), whose business model has long involved leveraging gains in property value to support further new development. Clipper’s dividend never has had much relation to their underlying economics.

In my opinion, the tax benefits from opportunity zones do not come remotely close to making up for these flaws.

This call is easy. Beware the seductive siren of OZ.

P.W. If you are new here, check out our other articles on:

• Real Estate

• Case Studies (with many on real estate deals and funds)

• One of my favorite articles: capital stacks

That’s when your deferred tax bill comes due (you’ll have until April 15th, 2027 to pay it), regardless of whether your fund has made distributions, whether you’ve held for five years or five months, or whether your investment is up or down. If your fund is illiquid (and most are), you’ll need to find that cash elsewhere.

With over $100 billion invested in OZ funds, the collective tax bill coming due December 31, 2026 could be in the $15-20 billion range, a massive liquidity event for what are mostly illiquid real estate vehicles.

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Today, we’ll break down:

• what Opportunity Zones are,

• how Qualified Opportunity Funds work (and the tax benefits),

• and what just changed with OZ 2.0

📚 Sources and further reading are included at the end of the post.

Disclaimer: This article is for educational purposes only and does not constitute investment advice, tax advice, or a recommendation to invest in Opportunity Zones. Consult with qualified tax and financial professionals before making any investment decisions.

How It Stared

Opportunity Zones were created under the 2017 Tax Cuts and Jobs Act as a way to push private capital into economically distressed areas. Governors nominated eligible census tracts using 2010 census data, and Treasury ultimately certified 8,764 zones across the U.S.

To qualify originally, a tract generally needed either:

• A poverty rate above 20%, or

• Median family income below 80% of the surrounding area average.

In theory, this was about revitalizing struggling communities. In practice, a lot of capital discovered that some “distressed” neighborhoods were better situated than others (more on that below).

How the Tax Benefits Worked

The original OZ structure offered three incentives:

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