China-focused Capital Today plans to discontinue its evergreen structure and return to raising traditional closed-ended funds, according to two sources familiar with the situation.

LPs have already been sounded out regarding a USD 500m fund, the first source and a third source said, adding that discussions were preliminary. The first and second sources observed that in committing to raising a new closed-ended fund, the private equity firm would wind down the evergreen fund that has been in place for over 10 years.

Founded in 2005 by Cathy Xu, Capital Today claims USD 3bn in funds under management and a track record featuring prominent names in China’s consumer internet space. Two US dollar-denominated growth-stage funds were raised, the second closing on USD 583m in early 2011, AVCJ Research’s records show.

The firm’s experience with JD.com, which it backed from 2007 through a 2014 IPO, is said to have shaped the decision to switch to evergreen. With Fund I sitting on a partially realised return of more than 100x, there was pressure from some LPs to pursue a full exit in subsequent rounds. However, the team anticipated further upside, AVCJ previously reported.

Evergreen funds – excluding listed vehicles and the semi-liquid feeders that have proliferated in recent years as a means of targeting private wealth investors – are not widely used. Capital Today opted for a similar structure to that favoured by a cluster of US-based VC firms.

It typically comprises a 28-year fund divided into seven four-year activity periods. If an LP commits USD 10m at inception, at the end of year four it can choose either to re-up, which means putting in another USD 10m, liquidate its position, or in some cases place it in a run-off account to be wound down over time. An LP that re-ups every time would therefore end up investing USD 70m.

While evergreen funds offer greater flexibility, they are not suited to all LPs. Some investors told AVCJ at the time that they would not be able to re-up in Capital Today in this format.

The evergreen fund launched in 2014 with a USD 400m target. US regulatory filings dated November 2014, October 2018 and June 2022 indicate total offering amounts of USD 500m, USD 980m, and USD 1.1bn, respectively.

According to the second source, winding down the evergreen fund would be conditional on a vote of approval by participating LPs.

Capital Today did not respond to a request for comment.