We have advised on the launch of a significant number of evergreen funds in recent years, particularly in the private credit space.
Overview
In recent years, we have seen a proliferation of private credit and other private asset managers launching “evergreen” or “open-ended” fund structures. This trend is driven by a desire to provide investors with structures that offer greater liquidity than traditional closed-ended funds while still maintaining access to private asset classes.
The Three Key Models
Based on our experience advising on numerous evergreen fund launches, we have identified three common structural models:
1. Vintage Models
These structures closely resemble traditional closed-ended funds. The key distinguishing feature is the ability for investors to “roll” directly from one vintage to the next without needing to make a fresh commitment. This provides a quasi-evergreen experience while retaining the familiarity of closed-ended mechanics.
2. NAV-based Subscription Models with Run-off
In these models, investors subscribe at Net Asset Value (NAV). The distinguishing feature relates to liquidity: these models typically achieve investor exit through a “run-off” mechanism, where exiting investors receive distributions over time as the underlying portfolio amortizes or realizes, rather than through immediate redemption payments.
3. Pure NAV-based Open-ended Structures
These operate as fully open-ended vehicles. Subscriptions and redemptions occur at NAV (subject to gating, side-pocketing, and other liquidity management tools). These structures require the most sophisticated liquidity management frameworks given the inherent mismatch between illiquid private assets and regular redemption rights.
Conclusion
The choice of model depends heavily on the underlying asset class, the target investor base, and the manager's operational infrastructure. We continue to see innovation in this space as managers seek the optimal balance between liquidity and long-term capital deployment.