Carmignac Private Evergreen: Letter from the Fund Managers

Private Wealth
The private wealth market represents a substantial opportunity, with assets estimated at approximately $200 trillion globally¹. Despite this vast pool of assets, private investors allocate less than 3% to private markets, compared to around 14% for institutional investors². This disparity indicates significant potential for increased private market exposure among private investors. Semi-liquid funds have seen strong uptake in recent years, with an estimated global value of around $400 billion³.

Private Equity
Deal activity increased by 21% in 2024 compared to 2023, and by 45% above the pre-pandemic average⁴. The exit environment is seeing some signs of improvement, with distributions surpassing capital calls for the first time in eight years⁵. The rate environment is expected to support valuations further, with higher availability and lower cost of credit driving dealmaking.

Secondaries
In 2024, the secondaries market achieved a record-breaking transaction volume of approximately $160 billion⁶. This milestone not only underscores the rapid growth of the market but also surpasses the previous high set in 2021. The LP-led segment (consisting of investors deciding to sell interests in funds to other investors), representing 56% of the market, maintained its momentum throughout 2024, growing 41% year-over-year⁶. Liquidity pressure and a favourable pricing environment have prompted a diverse range of investors to turn to the secondaries market as a strategic tool for managing their private investment portfolios.

LP-led secondaries
Pricing for LP-led secondary deals remains relatively high, underscoring the need for discipline and non-price attributes such as speed and reliability of deal execution, as well as structuring to remain competitive. The convergence of bid-ask spreads appears to be increasing, driven by favourable investor sentiment⁴.

During the first quarter of 2025, the performance of Carmignac Private Evergreen was positive.

This performance is mainly due to the appreciation of the portfolio of Project Luigi, a LP-led Secondary deal exposing us to 12 mid-market companies across two funds managed by FSI, and Project Archimed, another LP-led Secondary deal arranged bilaterally with the seller, entailing the acquisition of a cherry-picked portfolio of 15 companies managed by a well-known French GP, Naxicap.

The positive value appreciation of Project Luigi included a realized exit generating a >3x return, and an uplift of 47% versus the valuation it was held at two quarters prior. The company saw transformational value creation during FSI’s tenure, including EBITDA tripling over less than a 2.5-year period, and the successful execution of a buy-and-build plan leading to 9 acquisitions.

The Q1 performance can also be attributed to the closing of two new opportunities, one secondary co-investment and one direct co-investment:

• Project Bernabeu: Acquisition of 24 funds interests controlled by reputable managers in Europe and the United States. The diversified portfolio of 121 underlying companies and the attractive acquisition price (18% discount to the closing net asset value) are two of the main features of this transaction.

• AHEAD⁷: A fast-growing technology consulting company helping large, blue-chip organizations to accelerate their IT transformation. The company is well-positioned to benefit from strong market tailwinds, with IT spending in the US projected to grow at c.9% CAGR from 2023 to 2028, as well as multiple value creation levers. The transaction was made at an attractive double-digit discount to NAV at closing, made possible through favourable buyer-seller dynamics.

Today, the portfolio offers exposure to more than 380 underlying companies through 9 transactions. It is highly diversified in terms of business sectors, geographies and vintages, with a focus on developed markets. Carmignac Private Evergreen is committed to a selection of high-quality assets acquired at attractive conditions with an average portfolio discount of 15% at closing compared to a market average of 6%⁸.

Continued increase in sophistication and maturity of the secondaries ecosystem
Existing investors in Private Equity – typically institutional investors – are recognizing secondaries as an effective tool for managing their investment portfolio, be it to adjust their Private Equity exposure (e.g. to respect target asset class allocations), crystalize returns (e.g. to take profit once a target return is reached), or generate liquidity (e.g. to honour liquidity needs such as capital calls for closed-ended funds). In the current environment, rebalancing is especially important due to significant fluctuations in public markets. These movements can result in an increased exposure to private markets compared to the target allocation, owing to the Denominator Effect.

The overall sophistication represents a key driver for the secondaries market, facilitating the exchange of existing Private Equity investments, similar to how the listed stock market enables the exchange of listed shares. The rise of evergreen structures is also crucial in opening up the secondaries market to new potential buyers and sellers, facilitating secondaries’ transition to a mainstream investment option as well as a healthy, mature ecosystem.

Optimism for secondaries and mid-market private companies
The secondaries market is projected to grow significantly, with some forecasts estimating a market size between $500 billion and $1 trillion by 2030⁹. This represents an exciting opportunity for high quality deal flow and for a broader investor participation in its value creation. 2025 also presents significant opportunities in mid-market private companies, given their propensity to be more agile, a key attribute in the face of a highly uncertain and fast-evolving environment. In the context of Private Equity investing, we see mid-market companies as also having greater exit optionality given their relative size (e.g. not being “reliant” on an IPO for an exit).

Finally, the nature of companies being private allows investors to remain focused on their fundamentals as well as the value creation thesis, while disregarding the transitory noise. Given our long-term perspective, as long as the investment thesis stays in-tact, a robust company will maintain its value creation and performance potential, even if it means potentially taking a little longer to achieve its target returns.

M&A outlook improving slowly but surely
With the ECB’s recent interest rate cut coupled with strong expectations for imminent cuts in the US, M&A deal activity is expected to gradually see a rebound after sluggish activity over the past two years. This is supported by narrowing valuation (bid-ask) gaps between buyers and sellers, paving the way for successful deal-making.

This dynamic gives us a cautiously optimistic outlook for 2025 buyout, buy-and-build, and exit conditions for Private Equity, though the effects might be somewhat stymied by the recent market turbulence and general uncertainty created by Trump’s indiscriminate global tariff impositions.