For those advisors whose clients are looking into private funds, Brennan said the key element is education. Advisors should make sure they understand the product so they can explain it thoroughly to the clients. First they need to educate themselves, and next they must educate the clients about all the risks and different structures available and the different nuances within the private market asset class.
Advisors must also determine how they intend to access this market for their clients. There are multiple ways of doing it, whether it’s through a feeder fund, an evergreen fund or a traditional equity investment.
“There are so many challenges around accessing traditional private equity,” Brennan said. “It's about trying to find a platform or a partner that will allow you to access those top tier opportunities.”
There is a significant amount of administrative work associated with filing a traditional equity fund, including paperwork, so many investors might find it more efficient to use an evergreen fund to access the private markets.
In an interview with Financial Advisor, Brennan said the evergreen version of the funds is ideal for those investors with limited experience in the private space or who are looking for an efficient way into it. Traditional investments involve ongoing infusions of capital and lock up investors' capital for 10 to 12 years, while evergreen vehicles have a one-time funding obligation and include the option of monthly or quarterly limited liquidity..
The traditional investment is for the more ultra-high-net-worth investors who do not mind the additional administrative requirements. They might also have a more long-term goal with their investment and can afford to wait while their initial investment matures.