Is the growth of evergreen funds among asset owners genuine innovation or marketing hype?
As demand for private assets has gone up, the number of evergreen funds available has increased by 200 per cent over the past decade. Are these vehicles a genuine innovation, or is it all just marketing?
The rapid rise of evergreen fund structures across private markets is fuelling a growing debate among investors, managers and consultants over whether these vehicles represent genuine innovation—or simply a more marketable way to package illiquid assets.
Open-ended, or “evergreen”, funds have gained traction as private markets managers look to tap new sources of capital and investors search for easier ways into the asset class.
Their number has increased by more than 200 per cent over the past decade - and by 25 per cent in the past five years.
Unlike traditional closed-end funds, which require periodic commitments and long lock-ups, evergreen vehicles allow investors to subscribe—and, in theory, redeem—on an ongoing basis. Industry estimates suggest the market is still relatively small but growing quickly, with firms such as Hamilton Lane describing evergreen structures as a “dynamic growth engine” within private markets.
Keith Crouch, executive director at MSCI Research & Development, said the trend towards open-ended funds in private assets was “one of the most significant structural shifts in private markets in decades”.
But that promise of flexibility is exactly where opinions begin to diverge.
For Dan Rasmussen, founder and managing partner at Verdad Advisors, the surge in interest reflects industry incentives as much as investor demand. “Evergreen funds are products that are sold, not bought,” he says, pointing to what he describes as a “massive marketing hinge” pushing these products into wealth channels in recent years.
Private equity’s long-standing aura of exclusivity has played a key role. Managers have increasingly positioned evergreen funds as a way for retail investors to access strategies traditionally reserved for endowments and large institutions.
The economics help explain the push. “Maybe it’s 4 to 6 per cent fees all in, somewhere in that range,” says Rasmussen. That, in turn, raises the bar for performance. “You need to be outperforming by 700, 800 basis points relative to public equities in order to justify this.”
At the same time, the shift towards evergreen structures is showing up in how managers are building their businesses. Hamilton Lane itself manages roughly $15–16bn across a range of evergreen vehicles, reflecting how these strategies are becoming a core part of product line-ups across private markets.
But the growth is not just about distribution.
According to Avery Robinson, senior vice president and manager of Callan’s real assets consulting group, much of the momentum is coming from the manager community itself, as companies look for more efficient ways to manage capital. “What we're seeing more of is coming from the manager community who are realising that, ‘hey, if we can wrap our traditional closed-end funds… it makes things a bit easier for us,” he explains. “We don't have to keep coming out to market every three years and reselling this product. We can evolve with the market.”
For investors that shift can definitely be appealing. Evergreen funds allow for continuous exposure without the need to repeatedly commit to new vintages and can simplify portfolio management for institutions that lack the resources to constantly reassess commitments.
Evergreen structures also reduce the J-curve by putting capital to work more quickly and tend to emphasise steadier, income-oriented return profiles.
In some areas the structure may also be a better fit. In real assets such as infrastructure and core real estate—where investments are long-lived and less frequently traded—open-ended vehicles can align more naturally with the underlying assets.
Robinson notes that growth has expanded beyond core into core-plus and more sector-specific strategies, including industrial and multi-family.
Still, the flexibility these funds promise comes with clear limitations—particularly around liquidity.
Rasmussen is sceptical of how that feature is presented. “In reality, you have a semi-liquid product and you're going to pay 4 to 6 percent a year in fees for that semi liquid product,” he says. Redemption caps, often around 5 per cent per quarter, can become binding, and “a lot of these funds are getting redemption requests that are above what they can redeem.”
For him, that reflects a deeper issue. “I think it's fundamentally a mismatch between the underlying product and the structure that they tried to put it in,” he says, arguing that illiquid assets are difficult to reconcile with vehicles that suggest easier access.
Robinson does not dispute the constraint, but frames it as inherent to private markets. “It's more of just understanding that liquidity will be limited during parts of the cycle,” he says. “That's just part of what you accept.” In practice, he adds, “probably, when you need it the most, that's when it's going to be the least liquid”.
Crouch said: “Regulators will be watching. As these funds scale, liquidity mismatch moves from a theoretical to systemic concern, and standards around redemption policies, valuation practices and disclosure are likely to evolve. The inclusion of private assets in retirement accounts only raises the stakes.”
Beyond liquidity, questions are also emerging about whether private markets can deliver enough to justify their cost in an evergreen format.
Some data suggests the picture is more nuanced. According to Hamilton Lane, evergreen funds have in certain cases outperformed comparable closed-end structures over one- and three-year periods, challenging the assumption that investors must sacrifice returns for flexibility.
Even so, the broader backdrop for private equity remains challenging - regardless of which vehicle it’s held in. Higher interest rates, slower growth and a more difficult exit environment are weighing on private markets more generally. Rasmussen points to a “shrinking pool of buyers” and more expensive debt, which together are making exits harder and valuations weaker.
“I think over the next few years, you're just gonna see more and more pain,” says Rasmussen.
Even for investors who see the appeal, evergreen funds introduce new complexities. Because the vehicles are perpetual, managers have greater flexibility to shift portfolio exposures over time—meaning a fund can look very different years after the initial investment.
“If you're not monitoring that manager closely and then thinking about their expertise and if it's the best fund to have high exposure to, you're going to look up and have a very different product than what you signed up for maybe 10 years ago,” Robinson says.
There are also questions around incentives. With fees typically tied to net asset value, managers may be less motivated to sell assets. “If you select an open-ended fund, whose manager is not really interested in really selling assets, they may miss times where it's a good time to sell,” Robinson says.
“They're just like, ‘well, we'll just keep it, and essentially maintain this fee revenue’.”
But many of these points are ones which could be made about fund managers of open-ended funds in any asset class or any structure.
Either way, demand continues to build—particularly among wealth investors looking for simpler access to private markets without the complexity of capital calls and vintage management.
As the model expands further into private equity and credit, the debate is unlikely to settle. Instead it is becoming a defining question for the industry: whether evergreen funds are genuinely broadening access to private markets—or simply extending their risks to a wider set of investors.