Sam Metland, head of solutions engineering at Citco Fund Services, on how evergreen funds have become an increasingly popular option for fund managers amid a shift in demand for exposure to both public and private marketsEvergreen funds aim to blend the best of both private and public investment worlds. These innovative investment vehicles are bridging the gap between the two, allowing a broader range of investors to access the historically high returns of private investments alongside traditional markets.Demand is coming from HNWs, family offices and private banks who want access to private assets via structures that provide liquidity. In turn, evergreens have started to be used to create products to meet that need, with a recent industry survey by Funds Europe Intelligence in partnership with Citco predicting that portfolios may have up to 50% invested in private assets in future.The future looks bright for evergreen structuresDuring the past three decades – with a notable uptick since the 2008/09 financial crisis – private markets have generally outperformed traditional public markets, attracting significant investor interest. As more and more money pivots towards private markets, structures like evergreen funds have become increasingly popular.At their core, evergreen funds typically exhibit two defining features. First, they invest in illiquid private assets such as infrastructure, real estate, or private equity, while also allocating a portion of their capital to liquid, public-market securities. This mix allows them to offer a degree of liquidity not traditionally available in private-market investments. Secondly, these funds provide more frequent redemption options through “liquidity windows”, enabling investors to withdraw their capital more readily than in conventional private funds. One of the most compelling aspects of evergreen funds is their ability to maintain capital deployment and efficiently reinvest cash, surpassing the capabilities of traditional closed-end structures. This unique feature enables evergreen funds to harness the power of compounding more effectively, potentially leading to enhanced returns over time.
One of the most compelling aspects of evergreen funds is their ability to maintain capital deployment and efficiently reinvest cash, surpassing the capabilities of traditional closed-end structures
But this does not mean that the structure is simple – the creation and operation of evergreens has added complexity, particularly around the management of cash to meet liquidity needs. Even within the realm of evergreens, there are multiple categories with different use cases. Limited liquidity evergreens, for example, may be more suitable for income-generating assets – such as private debt – whereas runoff class evergreens may work better for private equity.Evergreens can also be used as an additional source of capital for an investment strategy that is already successful, rather than to fully fund a particula
