Evergreen funds are rapidly gaining momentum in Private Markets by offering a flexible, diversified alternative to traditional closed-ended vehicles. Evergreens provide immediate access to a fully-paid-in portfolio of Private Markets investments, while continuously reinvesting the proceeds over time. As a result, they represent a simple yet highly effective approach for private individuals and institutional investors to access Private Markets.
What are evergreen funds exactly?
Evergreen funds work as perpetual (open-ended) funds, where investors can invest (“subscribe”) and sell (“redeem”) their investments over time. Subscriptions are typically possible on a monthly basis, redemptions quarterly. Funds automatically recycle exit proceeds into new deals, creating compounding returns for investors from day one. Similar to public-market ETFs, evergreens can be distributing or accumulating (cash income or no cash income for investors).
Differences between evergreens and closed-ended funds
Why are evergreen funds attractive for investors?
Evergreen funds can substantially reduce complexity for Private Markets investors. In particular, evergreens exhibit 3 key advantages for investors:
Simple yet effective processes during investment and exit
Diversified investment allocation to Private Markets
Accumulating, compounding returns of Private Markets investments
1. Simple yet effective processes during investment and exit
Evergreens reduce complexity of investors by eliminating capital calls, enabling flexible investment and exit windows, simplifying transaction processes, and streamlining the required documentation to complete transactions.
Consequently, investors in evergreen funds are fully invested from day one and can avoid the typical administrative burdens arising when investing in traditional closed-ended funds.
2. Diversified investment allocation to Private Markets
Evergreen funds typically invest in the complete portfolio/platform of one or several Private Markets managers – resulting in a significantly higher number of investments per fund.
The approach allows evergreens to gain exposure across geographies, vintages, industries, and more. By capitalizing on a manager’s ongoing deal flow and reinvesting returns, evergreen funds maintain dynamic diversification overtime, reduce concentration risk, and enhance portfolio resilience.
3. Accumulating, compounding returns of Private Markets investments
Traditional closed-ended funds (which draw capital over several years and return proceeds to investors after selling assets), typically require ongoing cash management by investors and often result in larger parts of the committed capital not being at work in Private Markets.
The structure of evergreen funds (fully paid-in portfolios; continuous reinvestment of returns) is set up to maximize time in the market, avoid cash drag, and enhance the long-term compounding effect for investors. As a result, evergreens have the potential to generate higher performance vs. closed-ended funds over the investment horizon when net returns are equal.
In short: The value proposition of evergreen funds
Core allocation in Private Markets
Evergreen funds are a simple, effective, and efficient way for investors to gain a core holding in Private Markets.
Reduced complexity of investments
Evergreens simplify the process for investors to access Private Markets, building the basis for an effective integration in existing portfolios.
Increased diversification through a single investment
Investing in a broad portfolio of assets, evergreens allow for enhanced diversification in Private Markets – via one investment vehicle.
Robust performance due to compounding returns
Since evergreens are fully funded (no capital calls) and continuously reinvest their proceeds, they offer competitive return opportunities.
Want to know more about evergreens or iAccess Partners?
1) Closed-ended fund assumes that capital is deployed in equal increments over a 5-year investment period and that investments are held for 5 years before their sale and distribution of capital. Undrawn capital is assumed to be held in a 60/40 portfolio of public equities and bonds generating a 6.8% return assuming a 5% return for bonds and 8% return for equities, which is the long-run historical returns of the MSCI World Index and Bloomberg Global Agg Index since 1990.
Private Real Estate has grown over the last decade into a multi-trillion-euro asset class
Private Real Estate has grown significantly in popularity since its emergence in the 1990s and has since become an institutionalized asset class valued at approximately €3.7 trillion.
Why Private Real Estate?
Attractive risk-adjusted returns
Stable returns beyond public real estate: Private Real Estate has historically outperformed its public counterpart, enabled by rigorous value creation and asset selection strategies
Low volatility and steady appreciation: Private Real Estate is a traditionally stable asset class, enabled by appreciating assets with long-term contracts
Fit to macro environment
Value-adding impact on communities: Investments in Private Real Estate have a sustainable impact on regional and global communities via development of housing and offices
Growing real estate market: Growth fueled by macroeconomic trends such as population increase, continued urbanization, and digitalization
Downside protection
Reduced risk of loss: Private Real Estate funds face low downside risks due to a rigorous asset selection processes and appreciating, tangible underlying assets
Inflation hedge and low stock/bond correlation: Private Real Estate value is linked to inflation rates, reducing inflation risk, while exhibiting low correlation with stocks and bonds
Return drivers of the four main Private Real Estate strategies
Within Private Real Estate, there are four primary investment strategies that offer investors different risk-return profiles and differ when it comes to the two main return drivers: (i)capital appreciation and (ii) income.
