Permanent capital has become a buzzword in the PE industry, particularly among sponsors frustrated with selling immature assets or fatigued by continuously fundraising. Although various fund structures qualify as permanent capital vehicles, publicly listed registered funds offer the purest form of the approach. Even if sponsors overcome the hurdle to register funds under the Investment Company Act of 1940, however, many find it prohibitive to list those funds on publicly traded exchanges. Alternatively, unlisted registered funds offer a gentler entry into the world of registration, while offering appealing features such as familiarity to LPs or an infinite lifespan offset by continuous offerings and redemption options. This first article in a three-part series discusses different definitions of permanent capital; the location of unlisted registered funds on the spectrum of permanence; and their fundamental traits and advantages. The second article
will explore the challenges of creating and operating unlisted registered funds and provide an overview of private and non-traded business development companies. The third article
will review closed-end funds of PE funds and interval funds and analyze how sponsors can determine which vehicle is right for them. See our two-part series on liquidity options for PE funds: “Potential Capital Sources, GP‑Led Restructurings and Alternative Paths Available to Sponsors
” (Sep. 15, 2020); and “Preferred Equity Lines, Top-Up Funds and NAV Credit Facilities
” (Sep. 22, 2020).