How to choose the right PE manager in the ELTIF era

Why manager selection matters more than ever in European private equity

The democratization of private equity has arrived in Europe. But as the ELTIF market expands, the quality of what's on offer varies enormously—and the importance of picking the right manager is as important as ever.

The European Long-Term Investment Fund (ELTIF) structure has done something genuinely significant: it has opened private equity to a broader universe of European investors, moving the asset class beyond its traditional institutional base. ELTIF 2.0 has accelerated that shift, lowering barriers and broadening eligibility. The result is a rapidly expanding product universe—and, inevitably, widening dispersion in quality.

For financial advisors and private bankers, recommending an ELTIF is no longer simply a question of asset class exposure.

It is a manager selection decision, with meaningful consequences for client outcomes. Three areas deserve particular scrutiny: investment strategy, manager appropriateness, and fund structure.

Investment strategy: What is actually driving returns?

Not all private equity exposure is equal, and the internal architecture of an ELTIF matters considerably.

One of the more capital-efficient building blocks for evergreen vehicles are direct investments—co-investments and private equity sponsor-led secondaries. Unlike traditional fund-of-funds structures, direct investments deploy capital immediately, avoiding unfunded commitments and mitigating the J-curve effect. Co-investments typically carry no management or performance fees at the asset level, and GP-led secondaries often benefit from negotiated fee terms. The result is a structurally more fee-efficient portfolio.

Return attribution is also worth reviewing carefully. Some evergreen funds—particularly those with heavy allocations to limited partner or investor-led secondaries—derive a meaningful share of returns from discount capture at entry: a one-time valuation uplift that benefits existing investors but offers little to those who subscribe later. Co-investments, by contrast, are oriented toward long-term operational value creation, which is better aligned with the continuous, open-ended nature of an evergreen structure.

Diversification is the third pillar. A multi-manager approach—investing alongside a broad range of leading private equity sponsors rather than concentrating exposure in a single manager—mitigates keyperson and headline risk, broadens the investment opportunity set, and unlocks other segments of the market, particularly the small and mid-market, that are not widely accessible through single-manager vehicles. For clients building a core private equity allocation, this kind of structural diversification is not optional; it is foundational.

Manager appropriateness: Evergreen is a different discipline

Running a closed-ended private equity fund and managing an open-ended evergreen structure are fundamentally different from an operational perspective. The skills do not automatically transfer.

Evergreen and ELTIF 2.0 structures require continuous management of subscriptions, redemptions, and frequent asset valuations—all while maintaining exposure to illiquid underlying investments. This demands institutional infrastructure and experience built over market cycles, not just investment acumen. Advisors should ask how long a team has specifically managed open-ended structures, and what their track record looks like through periods of market stress.

Deal flow is equally important and often underappreciated. An evergreen manager must maintain a consistent, high-quality pipeline to deploy capital efficiently and minimise cash drag. Without sufficient deal flow, selectivity is compromised. Volume and selectivity are not in tension—they are mutually dependent.

Allocation policy is the third consideration, and one that is easy to overlook. When a manager runs traditional closed-ended funds alongside evergreen vehicles, the risk of adverse selection is real: the most attractive deals may be prioritised for flagship funds, leaving evergreen investors with “leftover” opportunities. A formal, pro rata allocation policy—applied consistently across all vehicles regardless of structure—is a clear signal of genuine investor alignment.

Fund structure: Where alignment becomes visible

Liquidity mechanics reveal a great deal about manager philosophy. The ELTIF structure does not alter the illiquid nature of the underlying assets—liquidity is a potential structural feature, not a portfolio characteristic. The right framework prioritises capital preservation and avoids forced asset sales at distressed valuations to meet redemption requests.

Fee transparency is another indicator of alignment. Direct investment strategies typically carry no additional fee layer at the asset level. Structures that invest primarily in underlying funds often carry layered fees that can meaningfully erode net returns—and are not always clearly disclosed. Advisors should press for all-in cost clarity before making a recommendation.

Finally, platform connectivity matters for practical distribution. Managers genuinely committed to the European wealth market will have invested in the operational infrastructure to ensure broad availability on platforms such as Allfunds and Clearstream, alongside local-language support and dedicated distribution resources.

The selection imperative

The ELTIF market will continue to grow, and so will performance dispersion. In this environment, the question has shifted from whether an investor should allocate to private equity to which private equity manager they should invest with. The framework above is designed to cut through product complexity and focus attention where it matters most: strategy, expertise, and structural integrity.

Risk considerations relating to Private Equity strategies

Prospective investors should be aware that an investment in any private equity strategy is speculative and involves a high degree of risk, suitable only for investors with the financial sophistication and expertise to evaluate the merits and risks of such an investment, and that the investment does not represent a complete investment program. An investment should only be considered by persons who can afford a loss of their entire investment. This material is not intended to replace any of the materials that would be provided in connection with an investor’s consideration to invest in an actual private equity strategy, which would only be done pursuant to the terms of a confidential private placement memorandum and other related material. Prospective investors are urged to consult with their own tax and legal advisors about the implications of investing in a private equity strategy, including the risks and fees of such an investment.

You should consider the risks inherent with investing in private equity strategies:

Market conditions: Private equity strategies are based, in part, upon the premise that investments will be available for purchase at prices considered favourable. To the extent that current market conditions change or change more quickly, anticipated investment opportunities may cease to be available. There can be no assurance or guarantee that investment objectives will be achieved, that the past, targeted or estimated results be achieved or that investors will receive any return on their investments. Performance may be volatile. An investment should only be considered by persons who can afford a loss of their entire investment.

Legal, tax and regulatory risks: Legal, tax and regulatory changes (including changing enforcement priorities, changing interpretations of legal and regulatory precedents or varying applications of laws and regulations to particular facts and circumstances) could occur that may adversely affect a private equity strategy.

Default or excuse: If an Investor defaults on or is excused from its obligation to contribute capital to a private equity strategy, other Investors may be required to make additional contributions to replace such shortfall. In addition, an Investor may experience significant economic consequences should it fail to make required capital contributions.

Leverage: Investments in underlying portfolio companies whose capital structures may have significant leverage. These companies may be subject to restrictive financial and operating covenants. The leverage may impair these companies’ ability to finance their future operations and capital needs. The leveraged capital structure of such investments will increase the exposure of the portfolio companies to adverse economic factors such as rising interest rates, downturns in the economy or deteriorations in the condition of the portfolio company or its industry.

Highly competitive market for investment opportunities: The activity of identifying, completing and realising attractive investments is highly competitive, and involves a high degree of uncertainty. There can be no assurance or guarantee that a private equity strategy will be able to locate, consummate and exit investments that satisfy rate of return objectives or realise upon their values or that it will be able to invest fully its committed capital.

Reliance on key management personnel: The success of a private equity strategy may depend, in large part, upon the skill and expertise of investment professionals that manage the strategy.

Limited liquidity: There is no organised secondary market for investors in most private equity strategies, and none is expected to develop. There are typically also restrictions on withdrawal and transfer of interests.

Epidemics, pandemics, outbreaks of disease and public health issues: Neuberger’s business activities as well as the activities of the Fund and its operations and investments could be materially adversely affected by global outbreaks of disease, epidemics and public health issues. In particular, coronavirus, or COVID-19, spread rapidly around the world since its initial emergence in December 2019 and negatively affected the global economy, global equity markets and supply chains. Although the long-term effects of coronavirus, or COVID-19 cannot be completely predicted, previous occurrences of other epidemics, pandemics and outbreaks of disease, had material adverse effects on the economies, equity markets and operations of those countries and jurisdictions in which they were most prevalent. A recurrence of an outbreak of any kind of epidemic, communicable disease, virus or major public health issue could cause a slowdown in the levels of economic activity generally (or push the world or local economies into recession), which is likely to adversely affect the business, financial condition and operations of Neuberger and the Fund. Should these or other major public health issues, including pandemics, arise or spread farther (or continue to worsen), Neuberger and the Fund could be adversely affected by more stringent travel restrictions, mandatory quarantines and social distancing and additional limitations on Neuberger’s (or the Fund’s) operations and business activities.

Valuation risk: Due to the illiquid nature of many strategy investments, any approximation of their value will be based on a good-faith determination as to the fair value of those investments. There can be no assurance that these values will equal or approximate the price at which such investments may be sold or otherwise liquidated or disposed of. In particular, the impact of the recent COVID-19 pandemic is likely to lead to adverse impacts on valuations and other financial analyses for current and future periods.

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This presentation is for illustrative and discussion purposes only and does not constitute an offer or solicitation with respect to the purchase or sale of any security.

In addition to these risk considerations, there are specific risks that may apply to a particular private equity strategy. Any investment decision with respect to an investment in a private equity strategy should be made based upon the information contained in the confidential private placement memorandum of that strategy.

This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This material is not intended as a formal research report and should not be relied upon as a basis for making an investment decision. The firm, its employees and advisory clients may hold positions of companies within sectors discussed. Specific securities identified and described do not represent all of the securities purchased, sold or recommended for advisory clients. It should not be assumed that any investments in securities identified and described were or will be profitable. Any views or opinions expressed may not reflect those of the firm as a whole. Information presented may include estimates, outlooks, projections and other "forward looking statements." Due to a variety of factors, actual events may differ significantly from those presented. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Unless otherwise indicated returns shown reflect reinvestment of dividends and distributions. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.

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