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What are Private Markets – and why is it worth looking beyond the stock market?
Private Markets are investments in unlisted companies and assets. These include privately held firms, infrastructure projects such as energy or transportation networks, licensing and usage rights, as well as financing in the form of corporate loans.
Private Markets are gaining importance because an ever-increasing portion of economic value creation takes place outside the stock markets. Not only are small and medium-sized enterprises predominantly privately owned, but large companies with revenues exceeding $100 million are also predominantly in private hands worldwide. Only investors in the Private Markets can participate in their value creation. Furthermore, fewer and fewer companies are venturing onto the stock exchange floor, and the number of initial public offerings (IPOs) is declining sharply in many economies. In addition, stock markets have been increasingly focused for years on a handful of U.S. tech giants, the largest of which are also known as the Magnificent Seven. It is precisely this development that is bringing Private Markets increasingly into the focus of long-term investors. Be aware of the opportunities and risks involved in investing in Private Markets.
Erste Private Markets Evergreen ELTIF
With the launch of the Erste Private Markets Evergreen ELTIF, we are offering retail investors broad, diversified access to global Private Markets for the first time. The portfolio combines various private markets asset classes. Investors with a long-term investment horizon can benefit from professional management, low minimum investment requirements, and regular subscriptions and redemptions. However, please also be aware of the risks associated with investing in the ELTIF.
Erste Asset Management acts as investment advisor and contributes its many years of Private Markets experience to the strategic direction of the portfolio. Partners Group, one of the largest firms in the global private markets industry based in Switzerland, is responsible for implementing the investment strategy.
ELTIF Allocation
The goal of the ELTIF’s portfolio allocation is to sensibly combine various Private Markets asset classes, thereby combining sources of return with different characteristics and broadly diversifying risk. The composition combines growth-oriented and stabilizing elements and enables balanced participation in the performance of the real economy.
With a target allocation of 70% to Private Equity, the Erste Private Markets Evergreen ELTIF portfolio clearly focuses on long-term return opportunities from equity investments in companies where potential can be unlocked through the implementation of active value-creation measures. By adding Private Infrastructure, the portfolio can access cash flows that have historically shown relatively stable characteristics. The allocation in Private Credit and Royalties may contribute to portfolio diversification. It is possible that the capital invested may be lost if companies or projects do not perform as expected. The liquidity component, with a target weight of 10%, offers investors the flexibility of regular share purchases and redemptions. Please note that investing in this fund involves risks in addition to the opportunities described. Redemptions of units may be temporarily restricted or suspended.
The allocation of the Erste Private Markets Evergreen ELTIF is clearly focused on direct investments, which, with a target allocation of 70%, are intended to form the core of the portfolio. Secondaries – i.e., fund interests acquired on the secondary market – offer access to portfolios in advanced stages with shorter remaining terms. Primaries refer to the acquisition of target fund interests. This is intended to enable allocation to Private Markets asset classes that are rarely or hardly investable via direct investments. The liquidity component of the ELTIF consists of liquid Broadly Syndicated Loans (BSL), bonds with short remaining maturities, and cash. The charts below are for illustrative purposes only. Actual allocations may differ significantly.
The ELTIF’s main asset classes
The companies listed are selected as examples and do not constitute an investment recommendation. There is no guarantee that these securities will remain in the portfolio on a permanent basis.
Private equity involves investing in unlisted companies and actively helping them grow. Managers support these companies in expanding their operations, improving efficiency, or entering new markets. Losses of the capital invested are possible if companies or projects do not perform as expected.
Company example MPM: A provider of premium pet food
Private infrastructure encompasses investments in essential infrastructure such as energy, transportation, communications, and digital infrastructure. These assets are often critical to daily life and can provide stable, long-term returns. However, they may also result in losses.
Company example EdgeCore Digital Infrastructure: Operator of modern data centers
Private credit refers to companies obtaining loans outside the traditional banking system. Private credit financing typically features variable interest rates, and interest payments are regularly adjusted to a benchmark rate. This allows investors to benefit from rising interest rates and reduce their portfolio’s sensitivity to inflationary trends, which often lead to higher interest rates. The loans are often secured by stable income from long-term contracts. Losses of the capital invested are possible if companies or projects do not perform as expected.
Example: Loans for industrial companies looking to expand their capacity or develop new services.
Royalties are shares of the ongoing revenue generated by certain assets. These include, for example, intellectual property or licensing rights. Investors receive a share of future revenue in return. Losses of the capital invested are possible if companies or projects do not perform as expected.
Example: Shares of licensing fees from intellectual property, such as music rights or technology patents
Opportunities & risks – explained in simple terms
Opportunity for value appreciation
Active business development can generate additional returns over the years.
Evergreen Structure
The Evergreen structure enables rapid capital investment without capital calls under the new ELTIF 2.0 framework.
Broad Diversification
By investing across various Private Market asset classes, regions, and sectors, risk is diversified, which can help reduce the risk of loss.
Long-term commitment
Private Markets are geared toward the long term. Units often cannot be sold or redeemed at any time.
Currency risk
Due to the investment in foreign currencies, the fund value may be adversely affected by changes in exchange rates.
Possible capital loss
With Private Markets investments, there is a risk of losing the entire amount of capital invested.
Fund key facts
- Fund Type: open-end fund under the regulated ELTIF framework with a long-term focus
- ISIN: LU3284407254
- Minimum investment: 10,000 euros (depending on the institution)
- Subscriptions: possible monthly
- Redemptions: generally quarterly, subject to specified conditions
- Management fee: 2.2%
- Performance fee: 15%
- AIFM: Partners Group (Luxembourg) S.A.
- Portfolio Manager: Partners Group AG
- Investment advisor: Erste Asset Management
Documents
For detailed information on the cost components and risks associated with the fund, please refer to the KID and prospectus.
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An overview of the monthly reports is provided here.
FAQs for Erste Private Markets Evergreen ELTIF
The Erste Private Markets Evergreen ELTIF is suitable for investors who invest for the long term and wish to add Private Markets to their portfolio. It is aimed at investors who are willing to commit capital over several years and value a globally diversified and professionally managed solution. As a core component of Private Markets, the fund is well-suited as an addition to a multi-asset portfolio. Diversification does not ensure a profit or protect against loss.
The subscription and redemption of shares differ from other funds due to the illiquidity of the underlying assets of the ELTIF. Subscriptions are possible monthly, while redemptions can only occur quarterly. Redemptions are not permitted during the first two years following the launch of the share class. If you have any questions, please contact your advisor.
Traditional Private Equity funds are usually closed-end, have a fixed term, and operate with capital calls. An Evergreen ELTIF, on the other hand, has an open-end structure, invests on an ongoing basis, and does not require capital calls. The invested capital is broadly diversified from the outset, which can help mitigate typical initial phases of negative performance. Diversification does not ensure a profit or protect against loss.
The Erste Private Markets Evergreen ELTIF is designed for a long-term investment. Investors should have an investment horizon of several years. Private Markets investments require time to realize their full potential, as companies and projects are built up and developed over the long term.
During the so-called lock-up period, which lasts for two years following the launch of each share class of the Erste Private Markets Evergreen ELTIF, no redemptions may be made. This phase serves to gradually build up the portfolio and is intended to create a solid foundation for long-term portfolio success. Lock-up periods are standard practice in the market and are frequently found in evergreen funds.
Erste Asset Management contributes its regional market knowledge and long-standing Private Markets experience and is responsible for the strategic direction of the portfolio of the Erste Private Markets Evergreen ELTIF. Partners Group, as portfolio manager, is responsible for the specific implementation of the investment strategy in detail and manages the selection and administration of Private Markets investments on a global level.
The Erste Private Markets Evergreen ELTIF is currently available only through Erste Private Banking and selected savings banks. The minimum investment is 10,000 euros. Depending on the institution, lower limits may also be set.
Important legal information
This document is a marketing communication. Please refer to the Prospectus of the Fund and the Key Information Document before making any final investment decision. All data is sourced from Erste Asset Management GmbH / Partners Group (Luxembourg) S.A., unless indicated otherwise. Our languages of communication are German and English.
The Prospectus has been prepared for the Sub-Fund Erste Private Markets Evergreen ELTIF of the Partners Group Erste Evergreen S.A., SICAV (the “Fund”), an alternative investment fund managed by Partners Group (Luxembourg) S.A. (“AIFM”). The relevant Sub-Fund is qualified as an ELTIF in accordance with Regulation (EU) 2015/760.
The current Prospectus and the Key Information Document are available free of charge via www.fundinfo.com. Further information is also available at www.erste-am.com. Information including the exact date of the most recent publication of the Prospectus, the languages in which the Prospectus and the Key Information Document are available, and any additional locations where these documents may be obtained can be found via www.fundinfo.com. A summary of investor rights is available in German and English on the website of the AIFM (Partners Group) and at the registered office of Partners Group (Luxembourg) S.A. The AIFM may decide to terminate the arrangements it has made for the distribution of the Fund.
Our analyses and conclusions are general in nature and do not take into account the individual circumstances of investors, including, without limitation, their earnings situation, tax position or risk tolerance. Private markets investments are illiquid and involve a high degree of risk, including the risk of loss of capital. The value of investments and any income derived from them may go down as well as up, and investors may not recover the amount originally invested. Past performance is not a reliable indicator of future results. Those interested in purchasing shares in investment funds are advised to read the current Prospectus, especially the risk notices they contain, before making an investment decision. Where the fund’s base currency differs from the investor’s home currency, exchange rate fluctuations may have a positive or negative effect on the value of the investment and on fund-related costs when converted to the investor’s home currency.
The Fund may not be offered, sold or otherwise distributed in any jurisdiction except in compliance with applicable laws and regulations and the selling restrictions set out in the Prospectus and applicable local marketing documentation.