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Evergreen private equity vehicles are expanding access to the asset class. But as the market expands and new managers enter the space, not all evergreen products are positioned to deliver on their promise. The nuances between offerings may significantly impact outcomes: performance dispersion in private equity can be five times wider than in public markets.1
For advisors and investors evaluating this evolving landscape, due diligence starts with asking managers the right questions.
1. Do you have a strong track record in the strategy you’re pursuing or are you trying something new?
Why it matters: Some managers bring proven track records to their evergreen strategies, while others are experimenting with new investment approaches for the first time. Understanding whether a manager is following a proven strategy or experimenting with something novel is fundamental to evaluating risk.
The performance gap between top-quartile and bottom-quartile private equity managers is nearly 1,500 basis points, compared to a 300-basis-point disparity between public market managers.2 So, in private equity, the “who” is just as important, if not more than, the “what.”
What to look for: Are investments consistent with the manager’s institutional strategies? Do target returns align with their long-term track record?
Investors should look for managers who’ve demonstrated repeatable value creation through operational improvements, M&A, and strategic transformation.
2. Does your evergreen strategy have robust, consistent, and priority deal flow?
Why it matters: Maintaining an “always on” vehicle requires a continuous sourcing engine. Some managers have access to deal flow across their own platforms, while others rely on third-party deals through co-investments or secondaries.
What to look for: Single-manager strategies investing in their own deals typically benefit from deeper visibility into pipeline, timing, exits, and distributions. Those focused on taking controlled positions gain real-time insights into operations and risks, enabling efficient portfolio management, superior portfolio construction, and predictable cash flows.
However, not all single-manager structures are equal. Some invest alongside institutional funds on the same terms, while others access opportunities through parallel or third-party sourced transactions. These structural differences can affect the level of insight into portfolio companies, alignment of economics, and the manager’s ability to actively manage investments over time. Platform breadth is another important consideration — for instance, sector-specific managers may have more concentrated sourcing engines than those investing across multiple sectors and geographies.
Multi-manager strategies typically access a wider universe of opportunities but face different challenges: limited deal access, reduced allocation control, and dependence on market conditions and third-party capacity.
3. How do you manage liquidity?
Why it matters: Evergreen vehicles typically maintain liquidity sleeves to enable deployment and redemptions. How managers think about this sleeve’s risk-return profile reveals their overall approach to risk management.
What to look for: Is the sleeve designed for capital preservation or return generation? Is it truly liquid or market-sensitive?
Investors should evaluate these trade-offs carefully, as managers must balance inflows with redemptions and deployment.
4. How do you manage the operational complexities of your evergreen strategy?
Why it matters: Evergreen private equity requires scaled platforms, robust operational resources, and deep experience to manage effectively given the operational complexity of an “always on” vehicle.
What to look for:
- Continuous coordination across cash management, liquidity, hedging, valuations, risk management, etc.
- Ability to balance subscriptions/redemptions against investment activity
- Liquidity sleeve calibration that supports investors without disrupting portfolio objectives
- Specialized, scaled resources (people and processes) across functions
- Cycle-tested experience managing open-ended vehicles
As the evergreen landscape grows in size and adoption, the ability to manage complexity becomes less about structure and more about resources, infrastructure, scale, and experience.
5. How do you ensure alignment between you, your evergreen investors, and your other investing vehicles and clients?
Why it matters: Alignment among a manager’s stakeholders ensures all investors receive fair treatment.
What to look for: Incentives are an important indicator of alignment.
- Does an evergreen vehicle have similar economics as a drawdown vehicle?
- How often does the manager crystallize profit sharing, and are they paid in cash or shares?
- Does the manager have skin in the game?
Single-manager strategies typically have straightforward, one-layer economics. Multi-manager vehicles may incur a second fee layer, which may make it more difficult for the underlying portfolio to reach equivalent net returns.
Another critical indicator is the manager’s direct participation in their own investments. Consistent alignment across fund structures demonstrates genuine partnership.
Choosing the Right Partner
Not all evergreen strategies are created equal, and no single strategy will excel across all the dimensions discussed in this article. Going through this list of questions with managers should help investors navigate the nuances and understand which manager and evergreen solution is best suited for a client’s needs.
1, 2 eVestment Alliance database for 15-year period through December 31, 2024. US Equities include large and small cap indexes. Source: Preqin online database, performance as of December 2024 (includes vintages for the 15 years to 2022), top quartile, median, and bottom quartile boundary net IRRs. Performance for later vintage funds not available/meaningful. Preqin’s database is continually updated and subject to change. You cannot invest directly in an index. Index results assume the re-investment of all dividends and capital gains. There is no assurance that the trends described or depicted above will continue.
