Evergreen and semi-liquid fund structures have simplified access to private markets, but their liquidity profile can pose potential risks, according to a recent bfinance report.
The level of liquidity offered by some of the more recent evergreen solutions in the market can raise potential issues such as liquidity mismatch risk, dilution of returns, and limited or opaque performance track records, according to a report by investment consulting firm bfinance.
In a recent report examining private markets for private wealth, bfinance noted that the landscape for private markets had changed substantially over the past decade, with private markets previously the domain of institutional investors only.
“Private equity, private credit, infrastructure and real assets are no longer positioned solely for institutional capital; they are becoming increasingly central to the propositions being offered to high-net-worth and mass-affluent clients,” bfinance said.
A recent bfinance survey indicated that more than one-third of wealth managers are now increasing their use of open-ended or semi-liquid private markets strategies, reflecting a clear pivot towards structures that align with evolving client expectations – an investment universe that has rapidly evolved to become increasingly broad and complex.
The report explained that there have been two structural forces shaping the evolution of products in the private markets space, which are democratisation and retailisation.
“Democratisation refers to reducing traditional barriers to institutional-calibre private market exposure – lowering minimum ticket sizes, streamlining operational complexity and navigating regulatory hurdles – so that high-quality, institutional-grade strategies become viable within wealth portfolios,” it said.
“Retailisation, in contrast, centres on the creation of new products engineered specifically for the broader retail audience.”
bfinance warned that while these new retail products may offer greater liquidity or simplified mechanics, they can come at the expense of strong returns, acceptable fee loads, and structural robustness.
Evergreen vehicles, for example, offer ongoing subscriptions, simplified reporting, automatic reinvestment of distributions, and periodic redemption windows, but they also come with important trade-offs, the report stated.
“For wealth managers and their clients, this format brings welcome simplicity. It eliminates the J-curve, capital call mechanics – one of the more significant operational barriers in traditional closed-end model – and supports more seamless portfolio integration,” bfinance said.
However, there are also risks with evergreen structures, such as liquidity mismatch risk in what is an inherently illiquid asset class and the risk of diluted returns due to high cash buffers used in these products.
The high cash buffers in these products, which can be as high as 25 per cent depending on the product, can lead to a potential performance drag of 70–100 bps.
Some evergreens, particularly newer launches, also have limited or opaque performance track records. Fee layering and structural complexity can also obscure true return alignment.
The consulting firm noted that evergreen structures are not unique to the retail space.
“In core private credit and real assets, evergreens have long been used by institutional investors and demonstrated considerable resilience,” it said.
“These strategies are often well-matched to underlying cash-flowing assets with stable return profiles.”
However, the latest generation of evergreens – offering monthly, weekly, or in some cases, daily liquidity – raises more challenging questions, the investment consulting firm warned.
“In pursuit of broader distribution, liquidity terms risk exceeding what underlying investments can reliably support,” bfinance said.
“This introduces potential friction between investor expectations and fund reality. Liquidity can be helpful – but in private markets, more is not always better.”
Across the 400 evergreen strategies available in the market, bfinance said 64 per cent of multi-strategy and 58 per cent of single strategy offer quarterly liquidity, while 28 per cent and 31 per cent, respectively, offer more frequent redemptions.
The report noted that daily liquidity, which comes at the cost of high liquid asset allocation and gating clauses, remains rare.
