Evergreen funds are seen as the gateway to private markets for those with smaller reserves who do not want to lock in funds for lengthy periods, but as the sector grows consultants are warning investors to choose managers carefully.
As investors – both institutional and retail – seek diversification and growth from private markets so evergreen – or semi-liquid funds – have helped democratise alternative, placing them closer to traditional investments in how they are transacted.
These open-ended vehicles provide ongoing access, allowing asset owners to remain invested for as long as they choose.
No wonder then that evergreen funds have become one of the fastest-growing segments of the asset management industry. Figures from Morgan Stanley show that in the US alone, net assets under management totalled USD381 billion across 351 semi-liquid evergreen funds as of Q3 2024, with more than half of these funds having been launched just in the last four years.
Carne Group’s 2025 Change Report finds that more than four out of five (83 per cent) wealth managers say they are offering semi-liquid funds to their clients. Of those not already offering them, 60 per cent expect to do so in the next six to 12 months and 40 per cent will do so in the next two years.
When asked at what point clients will have 5 per cent of investible assets allocated to semi-liquid funds, more than half (54 per cent) of wealth managers say three to four years and 44 per cent say within four to five years.
Anish Butani, Managing Director, Infrastructure at Bfinance, says: “The growing appeal of semi-liquid private market vehicles represents a significant shift in how institutional investors approach illiquid asset classes. The concept of infrastructure, with its income-generating characteristics and long-term investment appeal, and open-ended funds is not a new one. What is new, however, is the emergence of evergreen, semi-liquid funds focusing on unlisted infrastructure that are attracting interest from both wealth and institutional investors alike—offering a flexible, income-focused alternative to traditional closed-end funds.”
Butani says managers are “pleasantly surprised” by the take up and interest from more institutional investors, including pension funds and insurers, attracted by the “ability to get money moving into private markets quickly”.
However, Butani says while investor demand for these strategies is growing, they come with important structural considerations.
First is the risk that too many of the same investor type are in the fund.
“If too much of the capital comes from a single investor type then you run the risk of correlated redemption behaviour in a downturn, which can be very difficult to manage in an illiquid portfolio,” Butani warns.
He says investors should ask managers about how diversified that client base is, not just in terms of numbers, but by type, geography and size of ticket.
Butani also warns investors to be vigilant on fees. Management fees are usually charged on NAV from day one, unlike closed-ended funds where fees are based on committed capital during the early years.
“The latter implies that investors start paying full fees even if the fund is not yet fully deployed, which can impact early returns,” Butani notes.
He also says performance fees are another area to watch.
“Some managers charge performance fees on unrealised gains, and while hurdles are often used, they’re not universal. Investors need to ask whether performance fees are based on realised exits or on paper gains—and whether there’s a high-water mark to protect against paying fees on temporary uplifts.”
