Private Equity ELTIFs: Selecting the Right Manager

A Framework for European Financial Advisors and Bankers

Private equity is no longer the exclusive domain of institutional investors – the European Long-Term Investment Fund (“ELTIF”) structure has opened the asset class to European retail investors, but not all ELTIF managers are created equal. As the market matures and the product universe expands, manager selection has never been more critical.

Here are some things to look for when evaluating an ELTIF in terms of investment strategy, manager appropriateness, and fund structure:

1. Investment Strategy

Portfolio Construction: Quality and Diversification

Look for managers that pursue companies with strong growth potential, proven business models and resilient competitive positions; equally important is appropriate diversification across industry, geography and company size, to manage concentration risk.

Ask

• What are the fund’s diversification objectives?
• Is the fund investing in mature, proven businesses or in early-stage companies/startups?
• Does the fund have sufficient industry diversification to manage concentration risks?

Direct Investments: A Capital-Efficient Approach

For evergreen vehicles, we believe direct investments, such as co-investments and GP-led secondaries, provide the optimal building block. They offer distinct advantages over fund investments:

• Capital efficiency: Capital is deployed immediately (no unfunded capital), mitigating the J-curve.
• Precise deployment: Providing greater control of the investment allocation, building the portfolio investment-by-investment.
• Fee efficiency: Co-investments typically have no management or performance fees; GP-led secondaries often have negotiated fees.

Ask

• What percentage of the portfolio is allocated to direct investments versus underlying fund investments (including LP-led secondaries)?

Performance Drivers: Focus on Long-Term Value Creation

Some evergreen funds, particularly those that invest heavily in traditional LP-led secondaries, derive a significant portion of their returns from discount capture at entry, a one-time valuation “pop” that can be misaligned with the continuous, long-term nature of an open-ended private equity fund. In this structure, existing investors benefit from that initial discount capture, while new investors rely on prospective asset appreciation. Co-investments have the potential to deliver value creation more consistently across the investment horizon.

Ask

• What is the primary driver of returns for the fund: discount capture at entry or long-term operational value creation?
• How does the manager monitor growth and operating performance of the portfolio investments?

Multi-Manager Strategy: Diversification Beyond a Single Private Equity Manager

Using a direct, multimanager investment approach that invests in deals alongside a wide range of leading private equity managers rather than a single manager (such as a co-investment strategy) can deliver meaningful benefits and serve as a risk mitigation tool:

• Eliminates single-manager risk, including key-person and headline risk.
• Accesses each manager’s core areas of expertise and increases number of investment opportunities
• Unlocks the small and middle market, which includes high-quality managers whose deal flow is not widely accessible.

For more insight into the key benefits of a direct, multimanager approach, read our recent white paper here.

Ask

• Is this going to be an investor’s core allocation to private equity? If so, will it provide appropriate manager diversification?
• Does the manager have established relationships with experienced private equity managers?
• How many lead sponsors does the manager actively invest alongside?

2. Manager Appropriateness

Evergreen Expertise: A Distinct Skill Set

Being a skilled investor does not automatically translate into evergreen management capability. Evergreen and open-ended ELTIF 2.0 structures investing in illiquid private equity assets are operationally complex. Managing ongoing subscriptions, redemptions and frequent valuations requires deep institutional knowledge and experience built over years.

Ask

• How long has this team managed evergreen or open-ended ELTIF 2.0 structures?
• What is their track record through market cycles?

Deal Flow: Volume Enables Efficiency and Selectivity

High deal flow is a structural necessity. An evergreen private equity manager should have a robust, continuous pipeline of high-quality investment opportunities to deploy capital efficiently and minimize cash drag. Only managers with sufficient deal flow can afford to be truly selective.

Ask

• How does the manager ensure a consistent pipeline of investment opportunities?
• What is the average number of investments reviewed versus executed annually?
• Is the manager able to deploy large capital inflows quickly?

Deal Allocation: A Fair Approach

When a private equity manager has traditional closed-ended funds, custom accounts and evergreen vehicles, there is inherent risk that the most attractive deals are allocated to flagship funds or the largest custom accounts, leaving evergreen investors with the “leftovers”. A pro rata allocation policy ensures evergreen investors access the same quality of deals as any other investor.

Ask

• Does the manager have a formal allocation policy governed by pro rata allocation across all vehicles regardless of structure or investor type?

Local Support: Tailored Resources

Consider whether the manager is equipped to support distribution in your market with:

• Investor-friendly materials, regular portfolio updates and digestible performance commentary
• Educational training for bankers and advisors
• Local language support

Ask

• Does the manager have dedicated resources on the ground in or near your market?

3. Fund Structure

Liquidity Mechanics: Manager Philosophy on Redemption Matters

The ELTIF structure does not change the illiquid nature of a fund’s underlying private equity investments; liquidity is a structural feature, not a portfolio characteristic. Managers with strong investor alignment prioritize capital preservation, ensuring redemption mechanics will not force the sale of high-quality assets at the wrong time or at diminished value. Managers promising liquidity that cannot be sustained during periods of market volatility are prioritizing marketability over investor protection.

Ask

• What are the redemption terms, including redemption frequency and potential limitations imposed by the manager?
• Does the manager commit to avoiding forced asset sales, ensuring investor value is not sacrificed to meet redemption requests during period of market stress?

Fee Structure:

Fee transparency is a direct reflection of investor alignment. An important distinction between funds that invest directly into companies and those that invest primarily in underlying private equity funds is that direct investment strategies typically have no additional layer of management or performance fees at the asset level, resulting in a more fee-efficient structure while underlying fund investment fees can meaningfully impact net returns and are often not clearly disclosed.

Ask

• What are the all-in fees, including management fee, performance fee and any additional expenses?
• Does the fund include underlying fund investments that charge an additional layer of fees?

Platform Connectivity:

Accessibility is an important consideration for financial advisors and bankers looking to connect their clients with private equity funds. Managers committed to the European wealth market will have the operational infrastructure in place for broad platform availability, ensuring a smooth onboarding process for clients.

Ask

• Is the fund accessible on major platforms, such as Allfunds, Attrax, FundSettle, DWP and Clearstream, for a seamless experience?

The ELTIF market is expanding rapidly. This framework is designed to cut through complexity and focus attention on the investment strategy, manager expertise and structural factors that can directly impact long-term outcomes for investors. In an environment of widening performance dispersion, manager selection is increasingly important.

For more information about Neuberger Private Markets solutions, visit www.nb.com/privatemarketsfunds.

Appendix: Sample Due Diligence Questions

Private Equity ELTIFs: Selecting the Right Manager
Investment Structure	What are the fund’s diversification objectives? Is the fund investing in mature, proven businesses or in early-stage companies/startups? Does the fund have sufficient industry diversification to manage concentration risks? What percentage of the portfolio is allocated to direct investments versus underlying fund investments (including LP-led secondaries)? What is the primary driver of returns for the fund: discount capture at entry or long-term operational value creation? How does the manager monitor growth and operating performance of the portfolio investments? Is this going to be an investor’s core allocation to private equity? If so, will it provide appropriate manager diversification? Does the manager have established relationships with experienced private equity managers? How many lead sponsors does the manager actively invest alongside?
Manager Appropriateness	How long has this team managed evergreen or open-ended ELTIF 2.0 structures? What is their track record through market cycles? How does the manager ensure a consistent pipeline of investment opportunities? What is the average number of investments reviewed versus executed annually? Is the manager able to deploy large capital inflows quickly? Does the manager have a formal allocation policy governed by pro rata allocation across all vehicles regardless of structure or investor type? Does the manager have dedicated resources on the ground in or near your market?
Fund Structure	What are the redemption terms, including redemption frequency and potential limitations imposed by the manager? Does the manager commit to avoiding forced asset sales, ensuring investor value is not sacrificed to meet redemption requests during period of market stress? What are the all-in fees, including management fee, performance fee and any additional expenses? Does the fund include underlying fund investments that charge an additional layer of fees? Is the fund accessible on major platforms, such as Allfunds and Clearstream, for a seamless experience?

For illustrative purposes only.