Evergreen funds currently account for $350 billion in global assets and represent a small but growing part of the overall private investment landscape. According to recent estimates from Preqina research firm specializing in private investments.
Domestically, evergreen vehicles include interval funds, business development companies (BDCs), tender offer funds and non-traded REITs. Internationally, the European Long-Term Investment Fund (ELTIF) and the UK Long-Term Asset Fund (LTAF) have also joined. Overall, Preqin counts 520 such funds globally, double the number five years ago.
A Preqin spokesman said: “The six structures we are initially targeting are not a limited list, but they are among the most popular structures in the US market. “For LTAF it is a very new structure within the UK. , so we want to ensure it is tracked from the outset. ELTIF is being driven by ESMA’s updated regulatory framework, which will further increase the usability of the structure to private wealth and retail clients. We will be looking to incorporate other structures in the future, initially primarily Europe.”
Some factors driving the use of these structures include lower minimum investment sizes compared to traditional private equity funds, immediate capital deployment, no capital calls, limited liquidity, and 1099 tax reporting (as opposed to K-1). Evergreen funds are also open to accredited investors, with some funds open to retail investors and other private structures open only to accredited purchasers and institutions.
“I think more and more advisors are starting to use these products,” said Luke Schmidt, senior financial analyst at Blue Vault Partners, a firm that specializes in evergreen funds. “A few years ago, when the focus was on non-traded REITs, some advisors got burned. So they’ve been hesitant to get back in. But the structure of these has changed. Fees have dropped significantly. NAV More frequently. Distribution is strong. So we’re seeing more and more advisors getting back into this space.”
Schmidt noted that BDCs and interval funds are particularly popular because many are focused on private credit, an area that can deliver healthy returns.
“America’s retirees are at a disadvantage,” said Kim Flynn, managing director of alternative investments at XA Investments LLC. “They once benefited from actively managed institutional prime investment portfolios overseen by the best pension managers in the world. Now it has Shift to every retiree. If that’s my burden, getting a diversified portfolio isn’t just a matter of taking on more risk. It’s a matter of building a portfolio that’s comparable to what I had before.”
