‘Retailisation’ of evergreen funds raises concerns

Evergreen funds are increasingly targeting the retail market, but experts are concerned that these strategies are more risky when retail investors are involved.

Concerns have also been raised that the shift towards retail has led to evergreen strategies attracting lower-quality assets.

Evergreen funds have soared in popularity in private credit over the past few years, with assets under management held in these strategies hitting $500bn (£368bn) in 2024, according to With Intelligence.

Last month, Partners Group’s private credit evergreen fund hit €2bn (£1.7bn), and in May, CVC Capital Partners said it had raised over €1bn in its two evergreen funds less than one year after launch.

“Most large private debt managers are considering an evergreen product, with several in the process of launching one,” said Sam Brooks, partner at law firm Macfarlanes.

These funds have already seen a surge in popularity among institutional investors.

But a recent survey by the Alternative Investment Management Association found four in 10 managers developing evergreen funds were aiming to target retail investors.

So, what is driving the popularity of evergreen structures in the retail market? Demand for increased liquidity is the main factor, according to Bryan Astheimer, head of SEI’s Investment Managers business for EMEA.

“Having more liquidity options is perhaps the biggest reason investors would be attracted to an evergreen fund,” he said.

“The flexibility to add and withdraw capital outside of a 10-to-12-year lockup is going to propel investors to an evergreen model.”

Despite the surge in popularity, some experts have raised concerns that evergreen funds are more complex to run, particularly when retail investors are involved, and this increases their risk.

“Offering a more liquid, perpetual version of a fund adds multiple layers of complexity across the entire firm, both in the back office and with the investor relations team – even more so if the fund will be offered to the non-institutional market, ” Astheimer said.

Read more: Evergreen funds present issues around valuations and fee conflicts

“The simple fact is that with more transactions, more NAVs to strike, and more reporting that needs to be accomplished, the risk for error elevates.”

Some experts have also suggested that evergreen funds targeting retail investors tend to attract lower-quality assets, as retail investors typically do less due diligence.

However, Jay Bala, chief executive of AIP Asset Management, said while this is “a concern rooted in a valid question, the assumption isn’t necessarily accurate”.

“The notion that evergreen funds house weaker credits because retail investors do less due diligence misunderstands how professional asset management works,” he said.

“Whether the capital is institutional or retail, every investment goes through a rigorous process – focusing on downside protection, capital structure and potential for upside above and beyond interest income.”

He added that the biggest issue for evergreen funds going forward will not be around who the investor is, but how the fund is governed.

“The most successful evergreen funds are the ones built with thoughtful liquidity planning, quality asset sourcing, and a deep understanding of investor needs,” he said.