Watch Estelle Dolla’s full interview on Smart Patrimoine – “Why go evergreen?” (in French).
Evergreen funds: another way to invest in private markets
Unlike a closed-end fund, whose investment cycle typically follows a sequence of phases (fundraising, investment, value creation, then exits), an evergreen fund has no predetermined lifespan.
Investors can generally subscribe on a regular basis and gain access to an already-built portfolio. Capital can therefore be deployed more quickly, with immediate visibility on part of the assets held.
This structure offers redemption options at set intervals. But this is precisely where an essential distinction must be made. The ability to exit a fund does not guarantee its liquidity.
The liquidity of an evergreen fund remains constrained
The recent strains observed in certain US private debt funds have brought this question back to the fore.
An evergreen fund remains a vehicle invested in private assets, whose liquidity is structurally lower than that of listed markets. The redemption windows offered to investors are therefore framed and may be subject to limitation mechanisms, particularly when exit requests become too large.
These mechanisms, often referred to as “gates”, make it possible to temporarily cap redemptions in order to avoid having to sell assets under poor conditions to meet excessive liquidity demands.
As Estelle Dolla points out, “we make access easier, but at no point do we make it liquid.”
The challenge is above all educational. Presenting evergreen funds as a way to remove the liquidity constraints inherent to private markets would risk creating false expectations among investors.
Evergreen and closed-end funds: two complementary approaches
The rise of evergreen funds does not mean they are intended to replace traditional closed-end funds.
On the contrary, the way they operate can make them a gateway to private markets, particularly for investors still unfamiliar with this asset class. Access to an already-built portfolio provides a clearer view of the investments made and shortens the period required to deploy capital.
Closed-end funds, meanwhile, retain their own characteristics: a commitment over a fixed term, gradual portfolio construction and exposure to a given investment vintage.
The point is therefore less to set the two models against each other than to understand how they can complement one another within a private assets allocation.
Selection does not stop at the underlying assets
The quality of the assets held and the experience of the management team remain fundamental, but they are not enough. It is also necessary to analyse portfolio construction, subscription and redemption terms, the level of cash held by the vehicle and its capacity to absorb periods of heavier redemption requests.
For wealth managers, family offices and private banks, four principles can thus be retained:
- Accessibility does not mean liquidity: an evergreen fund remains invested in private assets.
- Exit mechanisms must be understood upfront: redemption windows and gates are an integral part of how it operates.
- Evergreen and closed-end funds are complementary: they serve different investment rationales.
- Selection must take the vehicle’s structure into account: beyond the assets, its liquidity management and resilience are essential.
Evergreen funds help make private markets more accessible to a wider range of investors. This greater accessibility must, however, go hand in hand with more education and greater rigour in selection.
Education is at the heart of Private Corner’s approach, which supports its partners with investment solutions, dedicated tools and educational resources on private markets to help them build allocations suited to their clients’ objectives.
