Evergreen and perpetual funds are being sold to ordinary investors like mutual funds. The word perpetual describes the fund’s life, not yours.
Years ago I owned something I had been assured I could sell whenever I liked. And I could. Just not on the morning I actually needed to, and not at anything close to the price I had been quoting myself in my head. So I sold something else instead. Something good, something I had wanted to keep for years, because it was the only thing in the account that would move quickly.
That is the cost of misunderstanding liquidity. You rarely lose money on the illiquid thing. You lose it on the good thing you were forced to sell to raise cash.
Which brings me to a word appearing on more and more product literature aimed at ordinary investors, and quietly doing a lot of work: perpetual.
Two funds that look alike and are not
Start with the one you probably already own.
A mutual fund, or an OEIC as we tend to call them here, pools your money with everyone else’s and buys things that trade on public markets. Shares, bonds, that sort of thing. It prices daily, and because the underlying holdings can be sold in an afternoon, you can normally get your money out at that price. Not always. British commercial property funds have suspended dealing more than once, precisely because they held buildings while promising daily access. But normally.
Now the newer animal, wearing similar clothing.
A perpetual fund, also sold as evergreen or semi-liquid, holds private market assets. Private equity, private credit, infrastructure, real estate. Things that cannot be sold in an afternoon at a known price. You subscribe as you would to a mutual fund, without capital calls or a decade-long lock-up, and you can redeem periodically, typically quarterly.
Here is the part that matters. Those redemptions are usually capped, commonly around five per cent of the fund’s total value per quarter.
What the word perpetual is actually telling you
Perpetual means the fund never ends. Traditional private funds have a fixed life; they raise money once, invest it, sell everything and wind up after seven to twelve years. An evergreen fund keeps taking money in; keeps recycling proceeds into new deals, and never closes the doors.
It is a statement about the fund’s lifespan. It is not a statement about yours.
I want to be clear that the cap is not a trick. It is good design. If a fund holding illiquid assets promised unlimited daily withdrawals, the first serious wave of sellers would force a fire sale, and the people who stayed would be the ones paying for it. The gate protects the patient investor from the impatient one. A fund that pays out beyond its gate is weakening its own structure to look accommodating.
The cap is sensible right up until the quarter when you need your money, and so does everybody else. Then it is not a design feature, it is a queue.
This is not a fringe corner of the market
The five largest listed private markets managers now run around 1.5 trillion dollars in perpetual capital between them, roughly 40 per cent of everything they manage. Here in the UK, the Long Term Asset Fund was created by the regulator to let pension money reach these assets, and there are now more than twenty five of them on the market.
None of this is happening in a dark corner. It is being built deliberately, on the reasoning that private markets were gatekept for decades and ordinary investors were shut out of returns that institutions took for granted.
I agree with that reasoning. I have spent years arguing against exactly that kind of velvet rope, which is more or less the whole point of why finance was built to sound harder than it is. Access is a good thing.
But access is not the same as understanding, and a lower minimum investment does not come with the analyst team an institution would put behind the same decision. Somebody still has to ask whether the manager is any good, whether the valuations are realistic, and what the fees actually are. If the fund is not doing that for you, and it is not, then it is you.
The question I ask before I buy anything
Not “what does it return”. That comes second.
I ask which bucket the money belongs in. Money I could reach tomorrow, money I could reach this year, and money I have honestly promised to leave alone for a decade. Then I make sure the product matches the bucket rather than the other way round.
Perpetual products belong firmly in the third bucket. That is not a criticism. Long money should sit in long assets, and if you can leave it there through a bad quarter you will probably be rewarded for the patience. The failure is not owning them. The failure is owning them with money that has a job to do next year.
If you want the mechanics from a source that builds these things, KKR’s plain explainer on evergreen funds sets out the differences without the marketing gloss. Read it alongside the redemption terms of anything you are actually considering, because that is the page that tells you the truth.
Almost every expensive mistake I have made started with something quietly moving from the first bucket to the third while I was not paying attention.
The Jacqueline Brand — knowledge builds confidence, confidence builds wealth. This is editorial commentary for inspiration, not financial or professional advice. Always do your own research. The Collection
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