Evergreen Funds in Infrastructure: Flexibility with Caveats – and the Growing Role of Secondaries

Introduction

Evergreen funds, open-ended private market vehicles with no fixed end date, have experienced rapid growth, particularly in illiquid asset classes such as private equity and infrastructure. Their appeal lies in structural flexibility, ongoing access to capital, and periodic liquidity, attracting investors seeking long-term exposure to illiquid, income-generating assets.

However, this flexibility comes at a cost. To “square the circle”, evergreen funds must make structural compromises that result in persistent challenges regarding performance dilution, liquidity management, valuation transparency, governance, and fee alignment. These issues become particularly acute during market downturns or periods of limited deal activity. Unlike closed-end funds, which benefit from full capital deployment and strong manager accountability, evergreen funds must balance inflows, redemptions, and valuations in real time, often resulting in lower returns, higher costs and reduced transparency.

Unlike traditional closed-end funds with defined lifecycles (typically 10-12 years), evergreen funds offer continuous capital inflows and redemptions, positioning them as a more adaptable alternative. Yet, as adoption accelerates, so too does scrutiny – especially when compared to the proven closed-end model.

This article explores the evolution and structural limitations of evergreen infrastructure funds and highlights the areas in which investors should be cautious. It also argues that traditional closed-end funds, particularly those pursuing secondary strategies, better serve investors’ interests by mitigating risk, enhancing yield, and improving alignment in long-term private market portfolios.

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