Permanent Capital Vehicles (PCVs) are investment structures designed for an extended lifespan. While PCVs typically exceed traditional 10-year closed-end funds (often ranging from 15 to 20 years), they are neither indefinite nor illiquid. On the contrary, some PCVs provide distinctly better flexibility than traditional anchor funds.
They also vary from traditional closed-end funds in that rather than having a specific fundraising period and exit timeline, PCVs aim to maintain their principal perpetually. That continuity allows the VC to continue supporting a promising startup's growth as long as needed. It also enables GPs to reinvest and drive compounding returns for investors.
For investors and advisors, the seamlessness and perpetual nature of a permanent capital asset deliver a host of unique value propositions. Most notably, permanent funds offer a high degree of simplicity and flexibility, greater access to the private markets for more investors, and more ability for those investors to align their capital with their interests and liquidity needs.
Because some PCVs permit quarterly subscriptions and annual liquidity options, they are quickly becoming the vehicles of choice for Family Offices and Registered Investment Advisors (RIAs).
Longer timelines give startups more time to mature. Without pressure to exit investments within a set timeframe, managers can focus on supporting the long-term growth of high-potential portfolio companies. That extended timeline is an opportunity to generate higher returns. The ongoing nature of the fund allows managers to reinvest profits, potentially generating compounding returns for investors. In addition, the reduced portfolio turnover and the lack of fundraising cycles and performance fees associated with exits can help keep transaction costs low.
PCVs offer exceptional flexibility for portfolio composition and deal selection, particularly in uncertain markets. In addition, the long-term investment horizon can help mitigate market fluctuations. Managers are better equipped to adapt to evolving dynamics and maintain the fund's overall health.
The ability to make long-term investment decisions without considering fund lifespans or liquidity needs allows managers to invest in companies with longer return horizons. That fluid nature makes these funds excellent for safeguarding and growing capital for intergenerational wealth transfer.
PCVs enable investors to participate in the potential upside of long-term growth companies while satisfying the short-term liquidity needs of LPs. Because PCVs offer continual opportunities to manage participation – such as quarterly admittance and annual liquidity windows – LPs are better able to align their available liquidity with their desire to participate in the fund.
With proper portfolio management, permanent capital structures offer a distinct advantage because of the lack of the J-curve effect (where initial negative returns are followed by significant positive returns as investments mature). Because investors in permanent capital structures like evergreen funds are most likely investing in an existing portfolio rather than a blind pool, the chances are better that they are gaining immediate exposure to more mature assets, steadier returns, reduced cash drag, and better flexibility. In other words, permanent capital can be an ideal option for an investor seeking to mitigate the typical uncertainties and fee drag that can characterize traditional anchor funds.
The extended investment horizon fosters alignment between investors and the management team, encouraging decisions based on long-term value creation rather than short-term returns. Advisors and investors share a long-term perspective, minimizing potential conflicts arising from exit timelines. With a lack of exit pressure, advisors can structure investments to align with their clients' mission-oriented goals—such as creating a sustainable funding source for charitable commitments or scholarships.
VCs can implement permanent capital through various structures, including evergreen funds, tender offer funds, interval funds, continuation vehicles, and special purpose vehicles. The main questions around any of those structures relate to liquidity and fees.
Because of the long-term investment horizon that defines PCVs, they typically offer limited liquidity options compared to traditional funds. However, that is not to say that the investors in these funds are permanently locked up. For example, beginning in 2026, the BIP Ventures Evergreen BDC has an annual liquidity window after an investor has been in the fund for a year or more.
On the other end of the spectrum, large institutional family offices are creating holding company structures that typically allow the investment to be held for 15 or 20 years, or even longer, based on their investment thesis. Investors should be clear about the subscription and exit guidelines for the specific fund and confirm that their goals align before getting involved in one of these funds.
By design, permanent capital is an excellent option for investors seeking long-term engagement in the VC market. As universities, foundations, large corporations, and family offices seek to preserve and grow capital in perpetuity, their asset allocation to private markets allows them to create a permanent capital strategy. Individual investor time horizons and liquidity needs often prohibit their ability to invest like institutional investors. PCVs facilitate their access to the private markets while providing flexibility based on their financial situation.
As with any investment vehicle, honesty and clarity in decision–making and reporting should be the first expectation for investors considering a permanent capital vehicle. Advisors should assess the level of transparency the fund offers and act as a dynamic conduit for their investors.
Advisors play a vital role in clarifying the nuances of each structure. By navigating the term, risk, and liquidity considerations and helping investors understand the potential upsides and downsides of each option, advisors can equip their clients with tailored and extremely productive financial resources.
If you are an RIA or investor interested in learning more about BIP Ventures’ approach to innovative VC funds, permanent capital, or other alternatives, please get in touch. We are happy to have a conversation and we welcome you to take part in the upcoming webinar about alternatives happening on June 11th.
