How significant a role are evergreen funds playing in the growth of the wealth channel in private markets today?
If we take a step back, there are two primary drivers behind the growth that we have seen in investment in private markets from the wealth channel. The first is education, by which I mean educating investors on the need to go beyond the traditional 60:40 allocation strategy of equity and fixed income, and on how to reduce volatility risk and boost returns through exposure to private markets.
This education process has also focused on the fact that the universe of private companies versus public companies has increased by many multiples over time. This is particularly apparent in the tech space, where public companies like the Big Five have historically generated outsized returns for investors. Today, it is no longer possible to gain early access to companies like OpenAI and SpaceX through the public markets. The data clearly shows that the high-growth tech businesses are choosing to stay private for longer.
While that education piece has driven interest in private markets among wealth investors, what has facilitated access is product innovation and the proliferation of evergreen vehicles that has taken place in response to growing demand. After all, private equity, private credit, infrastructure and private real estate are not necessarily new investments for the wealth channel, but evergreen vehicles have provided an access point for investors right the way down the wealth spectrum.
I therefore view the rapid growth and evolution of evergreen vehicles as the biggest development that the private markets industry has experienced over the past 10-15 years. According to a 2025 Hamilton Lane study, these funds only account for around 5 percent of private market inflows today, still a relatively small piece of the industry as a whole, but I think we are still only at the very beginning of what that change will ultimately mean for private markets. Future growth will undoubtedly be impacted by increased regulation and wider market volatility, restricting liquidity or exits from evergreen vehicles.
What role are evergreen funds playing in private equity now, given that the asset class has been dominated by closed-end structures for decades?
When it comes to private equity specifically, our view is that it’s not a case of either/or. There is a place for both evergreen and closed-end funds to co-exist, depending on the underlying needs of the investor when it comes to risk/return, liquidity and any overarching objectives they have. And while the pendulum has clearly swung in favour of evergreen vehicles in the private credit market – we have plans in this space with Permira Credit – in private equity I think we are seeing two distinct waves.
The first wave was led by a handful of early movers: large, public asset management firms with a wide range of products across multiple strategies. The evergreen funds offered by these managers have provided a great first access point for wealth investors seeking broad exposure.
Over time, however, I think this will be complemented by more targeted, single-strategy solutions. In much the same way that private clients have adopted ‘core-satellite’ investment models in the public markets, with a mix of passive and active vehicles, I think early mover private markets allocations will start to be supplemented with additional, more specialised products.
That’s where the second wave comes in, which is still in its infancy today. Here, we are seeing firms whose flagship strategy makes up the lion’s share of the product suite, leading to a more specialised solution for investors. I would put Permira in this category. Unlike in private credit, where evergreen funds are increasingly taking market share, I think there will continue to be a role within more specialist PE firms for both closed-end and evergreen funds.
Which of the private markets asset classes are seeing evergreen funds feature most heavily, and why?
The explosion of evergreen funds really started in the private credit space. According to With Intelligence, evergreen credit structures have already surpassed around $500 billion in assets under management, as of earlier this year. That is a huge number.
The reason behind this is that the underlying characteristics of private credit – whether that’s the income generation, the shorter durations or the more frequent valuations – lend themselves more readily to open-end structures. The wealth market is also very much converted to evergreen funds in the private credit space, and we are also seeing a convergence with institutional capital there. That has not yet taken place to quite the same extent in other private markets asset classes.
Now though, institutional investors are also beginning to recognise that if you are trying to maintain a certain exposure and yield over and above what the public markets can offer, then the constant exposure that an evergreen fund offers on the private credit side makes more sense than a closed-end fund, what with the associated cash drag created by capital calls and distributions.
Why do you believe there is still a role for closedend funds in private equity, and will closed-end funds gradually disappear from other private markets asset classes, like private credit?
Closed-end funds remain a major presence in asset classes like private credit, and we don’t expect them to disappear entirely. In wealth, traditional direct lending strategies lend themselves to evergreen structures, but at the more opportunistic end of credit, closed-end structures continue to dominate, even among the wealth distributors.
Products with more technical complexity, for example around PIKs and warrants, I think will continue to play better in a closed-end context. There may well be less and less of a role for closed-end structures in private credit overall in future, but where they continue to exist, it will be at the end of the spectrum that is more akin to private equity.
And within private equity, I would say that having committed, long-term capital is one of the fundamental attributes of the asset class. Private equity investors think in decades, not quarters. It’s a patient asset class. This offers management teams a chance to adopt a flexible, duration mindset, and it provides portfolio companies with the time, space and toolbox to create lasting value without the distractions of all the stock price and liquidity challenges of the public market.
This means the closed-end drawdown structure is more than just an administrative model; it’s actually a core enabler of private equity’s value creation efforts. This is why, despite acknowledging the role for evergreen funds in building private equity portfolios, we continue to position ourselves as a closed-end private equity manager at this point in time.
Beyond providing the time and space to add value to portfolio companies, what are the pros and cons of evergreen and closed-end fund structures from a GP’s perspective?
With respect to fundraising, evergreen structures are clearly perpetual vehicles. They provide semi-permanent capital, and there is a value in that as a GP. It is also why we have seen public managers focus on building out their evergreen capabilities, in particular. It fits with the way they are incentivised.
For us, as a private manager focused on fully aligning our incentives with our investors, the advantage of tapping into the wealth channel via both evergreen and closed-end structures is the ability to broaden and diversify our capital base. We are extremely fortunate to have built a longstanding and sticky institutional investor base over the last four decades, but as we think about becoming not only a bigger, but also a better organisation, we recognise the benefits of diversifying that investor base, particularly as institutional capital starts to tap out in terms of growth.
From a portfolio management perspective, there are benefits to the closed-end model in terms of enabling the control mindset that we feel is so critical in today’s environment. It allows us to be patient in our origination, move at speed on value creation initiatives, and with conviction when we decide it is time to exit.
How significant a role do you see wealth investors and evergreen funds playing in private markets over the long term, and how might this affect the future of these asset classes?
Like I said before, I see the proliferation of evergreen vehicles as the most significant development in private markets in recent times, and there is no doubt in my mind that evergreens will continue to play a huge role in opening up private markets asset classes. The evergreen revolution is here to stay. There is also a huge amount of innovation and creativity going into broadening access to private markets in general right now. We are starting to see public-private partnerships emerge, for example, as well as the advent of tokenisation.
You only need to look at the extent of the hiring that has taken place within private markets firms – with people like me who have the exclusive remit of partnering with the wealth network – to see that this is a trend the industry is taking seriously and GPs are investing into heavily. Evergreen vehicles are just one part of a much more open-minded approach to structuring solutions that provide more access to the products that we have spent our lives managing, but which have historically only been open to institutional investors and the very wealthiest individuals.
Looking ahead, I think the next phase of democratisation will see solutions combining private equity, private credit, real estate and infrastructure in a single wrapper that will appeal to smaller wealth clients. We are still just at the beginning of this journey.
