Evergreen fund structures

FREQUENTLY ASKED QUESTIONS ON

EVERGREEN FUNDS

1. What is an evergreen fund?

An evergreen fund is an investment vehicle with no fixed end date. Unlike traditional closed-end private equity or credit funds, which liquidate after 7–12 years, evergreen funds allow perpetual investment and provide mechanisms for ongoing subscriptions and redemptions.

2. How do evergreen funds differ from closed-end funds?

  • Evergreen funds: Continuous fundraising, perpetual life, optional liquidity windows.

  • Closed-end funds: Fixed term, vintage fundraising, no redemption until liquidation.
    Evergreen funds resemble open-ended mutual funds in form but are designed to accommodate illiquid alternative assets.

3. Why were evergreen funds created?

They were designed to address:

  • Investor desire for long-term compounding without forced exits.

  • Manager need for permanent capital and reduced fundraising cycles.

  • Market demand for more flexible access to private markets.

4. Who typically invests in evergreen funds?

  • Family offices & HNWIs: Value flexibility and long-term compounding.

  • Pension funds & endowments: Use them for smoother allocations.

  • Wealth managers: Adopt them to provide private clients with institutional-quality alternatives.

  • Retail investors: Access through interval or tender-offer funds.

5. What asset classes are best suited to evergreen funds?

  • Well-suited: Private credit, core/core-plus real estate, infrastructure, diversified hedge fund strategies.

  • Less suited: Venture capital, distressed/special situations, and highly illiquid strategies with binary outcomes.

6. How do liquidity and redemptions work in evergreen funds?

Liquidity is typically managed through:

  • Periodic redemption windows (monthly, quarterly).

  • Redemption gates and notice periods.

  • Caps on withdrawals (e.g., 5–10% of NAV per quarter).
    This ensures that investor liquidity aligns with the long-term nature of underlying assets.

7. What are the advantages for investors?

  • Long-term compounding.

  • Entry and exit flexibility.

  • Reduced “cash drag” compared to closed-end vintages.

  • Potentially smoother portfolio allocation.

8. What are the risks or disadvantages?

  • Redemption mismatches during stress events.

  • Valuation challenges for illiquid assets.

  • Potential dilution if subscriptions/redemptions are poorly managed.

  • Greater governance and regulatory complexity.

9. What regulatory structures are most common?

  • U.S.: Interval funds, tender offer funds, non-traded REITs, BDCs.

  • Europe: Luxembourg RAIFs, SICAVs, Irish ICAVs, ELTIF 2.0.

  • Offshore: Cayman SPCs, Guernsey/Jersey hybrids.

10. How are evergreen funds valued?

Valuations are typically NAV-based, updated monthly or quarterly, and often rely on third-party valuation agents or manager models for illiquid assets.

11. How large is the evergreen fund industry today?

Global evergreen private market funds manage more than $400 billion (2024 estimates). The space is expected to grow at 10–15% CAGR, potentially exceeding $1 trillion by 2035.

12. What are some well-known examples of evergreen funds?

  • Blackstone Real Estate Income Trust (BREIT).

  • Blackstone Private Credit Fund (BCRED).

  • Apollo Alts platform for wealth managers.

13. What is the future outlook for evergreen funds?

  • Continued growth fueled by demand for private markets and democratization of alternatives.

  • Regulatory evolution (e.g., ELTIF 2.0 in Europe).

  • Technological innovation, including blockchain-based secondary liquidity.

  • Greater institutional adoption across pension funds, endowments, and wealth managers.