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Evergreen Funds Transform Private Market Access

  • Editor
  • 2 days ago
  • 3 min read

In Brief:

Private markets are experiencing a structural shift as evergreen fund structures democratize access to previously exclusive investments, with industry veterans warning that despite rapid growth, the space remains in its early innings. On the Alt Goes Mainstream podcast, Stephanie Davis, Managing Director and Co-Head of US Private Wealth Solutions at Hamilton Lane, and Nick Veronis, Co-Founder and Managing Partner at iCapital, dissect how these continuously offered funds are reshaping both institutional and retail investment landscapes. The conversation reveals how technological advances and regulatory innovations are creating what Davis calls a potential "3.0" evolution, where even mass affluent investors could access private equity through simplified structures that eliminate traditional barriers like capital calls and lengthy commitment periods.


Big Picture Drivers:

  • Access Revolution: Traditional private market barriers are dissolving as evergreen structures enable immediate deployment and continuous liquidity features

  • Economic Alignment: Both GPS and investors benefit from improved fee structures and institutional-style pricing in newer fund generations

  • Market Maturation: Industry moving from experimental 1.0 products with high fees to sophisticated 2.0 offerings with better alignment

  • Distribution Evolution: Multiple channels from wirehouses to RIAs are adopting these products with enhanced educational support


Key Topics Covered:

  • Structure Optimization: Different wrapper options including tender offer funds, interval funds, and BDCs tailored to specific investor segments

  • Multi-Manager Benefits: How platform scale enables access to exclusive deal flow and co-investment opportunities typically reserved for institutions

  • Liquidity Education: Managing investor expectations around semi-liquid features while emphasizing long-term illiquid nature of underlying assets

  • Market Timing: Strategies for allocation timing and the importance of consistent deployment versus attempting to time private market cycles


Key Insights:

  • Manager Selection: Manager selection remains the critical success factor in private equity, with top-quartile performers delivering 400-700 basis points of outperformance over public markets compared to bottom quartile managers.

  • Immediate Deployment: Evergreen funds enable immediate capital deployment and compounding from day one, contrasting with traditional drawdown funds where committed capital may take years to be fully invested.

  • Early Market: The industry is still in early stages despite recent growth, with potential to expand from accredited investors to mass affluent markets as structures continue evolving.

  • Education Infrastructure: Educational infrastructure remains crucial as advisors need comprehensive training on liquidity constraints, fee structures, and portfolio allocation strategies for these complex products.

  • Democratized Access: Co-investment access through evergreen structures is democratizing opportunities previously available only to large institutional investors like sovereigns and pension funds.

  • Private Market Dominance: Private markets now fund many of the fastest-growing US companies, with 87% of businesses generating over $100 million in annual revenue remaining private rather than public.


Memorable Quotes:

  • "If this was a baseball game what inning are we at? Are we really really early days? We probably are still really early days even though some people might think we're at 2.0" - Stephanie Davis, discussing the maturity level of the evergreen fund market

  • "You can't eat IRR... but you can't eat DPI either, so how should investors think about it from that perspective" - Michael Sidgmore, highlighting the tension between returns and liquidity needs

  • "ABCs Always be committing... market timing is difficult in the public markets, it's difficult in the private markets" - Stephanie Davis, advocating for consistent allocation strategies

  • "The old adage that private equity is sold not bought, that's still as true in the tech online enabled world as it is in the offline world" - Nick Veronis, emphasizing the importance of education and relationship-building

  • "Private wealth clients tend to pull their money out at the worst times. It's just the nature of what happens" - Stephanie Davis, warning about behavioral challenges in illiquid investments


The Wrap:

The evergreen fund revolution represents more than a structural innovation—it's fundamentally reshaping who can access private markets and how capital flows through the economy. As these products mature and regulatory frameworks adapt, the next phase could see mass market adoption similar to how commercial aviation transformed from an elite luxury to mainstream transportation. However, success will depend on continued education, appropriate allocation strategies, and maintaining realistic expectations about liquidity in what remains an inherently illiquid asset class.

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