Buyout, growth, secondaries, continuation. The largest alt asset class — and the most heterogeneous.
LPs commit capital — but don't fund it up front. GP calls capital as deals close, typically over a 4–5 year investment period.
GP improves portfolio company operations — cost reduction, revenue growth, strategic M&A, leverage optimization. Hold period averages 5–6 years per portfolio company.
Exits happen through IPO, strategic sale, or secondary sale to another PE firm. Capital plus carry is returned to LPs. Fund typically liquidates over years 6–10.
Classic 2-and-20: 2% management fee on committed capital + 20% carry over an 8% hurdle. Evergreen versions are typically 1.5% management + 15% incentive.
Large-cap and middle-market companies. Operational improvement-led value creation. Most predictable returns, broadest manager universe.
Late-stage growth companies. Less leverage, more bet on revenue growth. Tech-heavy. Higher variance than buyout.
Early-stage growth + late-stage venture overlap. Even higher variance. Treat as a separate asset class for allocation purposes.
Counter-cyclical strategy. Performs best in downturns. Hard to time entry — typically held as a small allocation always-on.
For Orion clients: 30–45% of the alts sleeve in PE for balanced/growth allocations. For conservative: 10–20%. PE is the highest-return alts category but also the longest-duration.
Evergreen: easier client experience, immediate exposure, quarterly liquidity. Drawdown: traditional structure, typically better access to top managers, no NAV-blending across vintages.
Generally yes — secondary positions are mature, partially-realized, and bought at a discount to NAV. Lower IRRs than primaries but shorter J-curve and stronger DPI.
Early-vintage drawdown funds show negative net IRR for the first 2–3 years (fees being drawn + new investments at cost). Evergreen vehicles smooth this through pre-existing portfolio.