The FlowStone Opportunity Fund (FSOF) is marketed as an innovative way for individual and smaller institutional investors to access private equity through a diversified mix of secondaries, primaries, and co-investments. Like many other secondaries private equity funds nowadays, FSOF moves away from require large capital commitments and long lock-up periods, and attempts to bridge the gap by offering quarterly subscriptions and redemptions.
This review is part of our ongoing series on private equity funds, dissecting their accessibility, performance, and investor-friendliness. So, where does FlowStone stand out—and where does it fall short? We use publicly available information, including information published by the sponsor, FlowStone.
What Makes FlowStone Unique?
FSOF differentiates itself in three key areas:
Evergreen Structure with Quarterly Liquidity
Unlike traditional private equity vehicles that require investors to lock up capital for 10+ years, FSOF is structured as an evergreen fund, allowing quarterly subscriptions and redemptions (subject to a 5% "gate" per quarter). While this doesn't make it a liquid fund, it provides more flexibility than the rigid drawdown models of standard PE funds.
Secondaries-Heavy Strategy
While some PE funds focus purely on primary commitments, FSOF leans heavily into secondaries (88% allocation), acquiring private equity fund stakes from other investors. This approach often means buying assets at a discount, potentially reducing the J-curve effect (the early-stage drag on returns caused by fees and slow capital deployment). Given that the fund invests in both LP-led and GP-led transactions, potential effects of an unequal distribution of the discount uplift amongst the fund's investors may be mitigated.
More Accessible to Individuals
With a $100,000 minimum investment (for Class M shares), FSOF lowers the barrier to entry compared to traditional PE funds that demand multi-million-dollar commitments.
Performance & Returns: Does It Deliver?
Where FSOF stands out is that it has delivered solid performance since its 2019 inception, with an annualized return of 14.47% as of Q4 2024. The fund launched relatively early compared to its peers, and therefore the longer term track record is interesting. Quarterly performance information is not publicly shared and therefore we do not comment on it in this post.
Importantly, the fund employs credit facilities to enhance returns and manage liquidity. While exact leverage levels are not disclosed, many secondary-focused private equity funds use moderate leverage. While leverage can improve returns in strong markets, it also increases risk during downturns. If market conditions deteriorate, leverage could magnify losses and reduce the fund's ability to meet redemption requests.
The Cost of Access: Fees & Expenses
Private equity investing is rarely cheap, and FSOF is no exception. Expense ratios range from 4.86% (Class A) to 4.01% (Class I/M), plus a 1.25% annual management fee and a 10% performance fee. While these numbers are in line with private equity norms, they are significantly higher than public-market alternatives like ETFs or mutual funds. Investors must decide whether the potential excess returns justify these costs.
Who Should Consider FlowStone?
FSOF is best suited for high-net-worth individuals and smaller institutions that:
- ✓Want highly diversified exposure (1300+ underlying companies) to private equity without the full lock-up of traditional PE funds
- ✓Prefer a secondaries-heavy approach that may reduce risk and improve liquidity
- ✓Can handle private equity's illiquid nature despite the quarterly redemption option
However, those expecting real liquidity, low fees, or absolute return consistency might find FSOF lacking. The quarterly redemptions are capped, and PE markets can be unpredictable, meaning liquidity may dry up in downturns.
Concluding notes
FSOF presents an interesting alternative to traditional private equity funds, especially for investors in the USA seeking more liquidity / flexibility. Secondaries remain an excellent asset class for evergreen structures and make it an attractive choice for investors that value liquidity but also want to tap into the higher returns of private equity and secondaries specifically.
Up Next in Our Series…
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