Evergreen funds are gaining ground as a preferred structure for private market access across the wealth channel. Yet beneath that momentum lie performance dispersion, liquidity risks, and structural gaps that demand sharper investor scrutiny.
Evergreen structures offer NAV-based pricing, simplified access, and periodic liquidity across credit, real estate, and private equity (PE). According to Morgan Stanley’s March 2025 report, semi-liquid evergreen funds have seen growing adoption among individual investors, institutions, and family offices due to their ability to offer immediate portfolio exposure and avoid drawdown periods. Total evergreen assets have now surpassed $427 billion, as per PitchBook. As adoption rises, so do structural demands. Long-term viability depends on delivering risk-adjusted returns without compromising private market fundamentals.
Uneven Performance in a Growing Market
Despite rising popularity, evergreen funds are far from standardized. Strategy mix and return profiles vary considerably. Over the 12 months ending April 2025, median returns ranged from 13.8% in PE to just 3.0% in real estate, as per PitchBook. Private debt, which dominates net assets, returned 7.8%. Secondaries and infrastructure posted strong top-decile results, while multi-asset funds highlighted how portfolio construction shapes outcomes.
This dispersion underscores the need to look beyond the fund structure. Although evergreen vehicles imply continuity, exposures, liquidity terms, and sourcing strategies vary widely across managers. Elements like secondaries-driven markups, appraisal lags, and turnover cycles distort short-term returns. While these vehicles broaden access, they require rigorous diligence and a clear understanding of how strategy design drives outcomes.
Secondaries: Short-Term Gains, Long-Term Risks
Secondaries-focused evergreen funds stood out over the past year, with median returns of 10.8% and top-decile performance at 17%, led by Cliffwater’s Cascade Private Capital Fund at 22%, as per PitchBook. Much of this outperformance stems from acquiring discounted fund stakes and revaluing them upward, inflating early results. Yet this edge tends to fade. Over a three-year horizon, top-performing secondaries funds have lagged private debt peers, constrained by fee drag and liquidity needs. Such results warrant caution, as they reflect timing-related gains more than persistent outperformance.
Limits to Liquidity and Scale
The risks embedded in evergreen structures are not theoretical. The Wildermuth Fund, a high-profile interval fund launched in 2017, collapsed into liquidation in 2023 after persistent outflows, negative returns, and the loss of its regulated investment company status. Share transactions were suspended, the board resigned, and a new advisor was appointed to oversee a difficult wind-down of illiquid positions. Investors remain locked in, with distributions delayed until at least late 2025.
This example highlights how redemption stress exposes structural weaknesses. Even NAV-based pricing and periodic liquidity will likely falter under pressure. Only 15 evergreen private market funds were launched globally in 2024, the lowest count since 2019, and just five were followed in early 2025, as per S&P Global. Despite rising wealth channel interest, launch activity remains limited by regulatory and operational hurdles. These vehicles expand access but still face valuation lags, redemption cycles, and compliance friction.
Challenges in Evergreen Fund Benchmarking
One of the most persistent structural gaps in the evergreen ecosystem is benchmarking. Many managers rely on public market indexes like the S&P 500 or leveraged loan benchmarks as points of reference. But these proxies fail to capture the illiquidity, muted volatility, and fee drag inherent in semi-liquid vehicles. The mismatch in asset composition, return timing, and valuation cadence makes such comparisons misleading for investors seeking real performance context.
Morningstar and others have responded by building preliminary evergreen fund indexes. These peer-group benchmarks segment returns by strategy, such as private debt, real estate, multi-asset, and secondaries. They enable relative performance assessment within the evergreen universe and help frame risk-adjusted outcomes against strategy-specific hurdles. With over 100 funds and $100 billion in tracked assets, these indexes offer a foundational tool for comparing outcomes in a still-evolving segment.
Winners and Laggards in Strategy Returns
Among evergreen strategies, private credit has been a consistent outperformer. Over one-year, three-year, and five-year horizons, private credit evergreen funds have outpaced leveraged loan and high-yield bond indexes, as per PitchBook. Despite index weighting caps, funds like the Cliffwater Corporate Lending Fund (CCLFX) have delivered performance exceeding their peer benchmarks by nearly 25 percentage points since 2020.
In contrast, evergreen real estate funds have consistently
underperformed, both relative to public counterparts and private market peers. Performance over five years has been modest, and fundraising momentum has slowed amid valuation pressures and elevated redemption activity. Real estate’s liquidity mismatch is particularly acute during market stress, and underperformance risks intensify when investor flows reverse. Real estate evergreen funds have experienced one of the highest incidences of loss since inception.
The Road Ahead
Evergreen funds must deliver consistent, risk-adjusted returns to sustain their expansion. While wealth platforms embrace the model, momentum alone won’t justify scale. Without stronger benchmarks, improved transparency, and clearer investor guidance, these vehicles risk being seen as more structure over substance. Moving forward, disciplined fund design and well-calibrated redemption terms will be essential. Peer comparisons are a step forward, but allocators must scrutinize structure and strategy before committing capital. Ultimately, long-term viability hinges on aligning investor expectations with the realities of semi-liquid investing.
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