What’s the difference?
Evergreen funds don’t pay their returns as cash back to the limited partners – the investors. Instead, they are recycled into the fund in search of future returns. Such funds might be listed as closed-end public stock companies. These kinds of funds have deeper roots elsewhere, but there there are a few in Canada. In fact, Thomson Reuters finds 78 Canadian funds report-worthy. How well have they done? The results aren’t pretty. Over the past year (ending June 30, 2009), both venture and mezzanine/buyout funds lost 20% or more. Over three, five and 10-year horizons, venture funds have made no money. Buyout/mezzanine firms have had a more respectable return – but only over a 10-year horizon – with a return of 21%. But that’s gross of fees. (Of course, when there are no net returns, there is no carried interest – on the 2 &20 model of 2% management fees and 20% of profits.)