Evergreen and closed-end funds: a complementary investment approach

As private markets become increasingly accessible to private investors, structuring exposure is emerging as a key challenge, with evergreen and closed-end funds serving distinct functions in building diversified and efficient private markets portfolios. Private banks play a key role in advising and educating their clients.

This article is an extract from Paperjam's Grand Dossier on Funds from April 2026

Private assets have long been the domain of institutional investors. Yet while individual investors hold roughly half of global wealth, they still only account for a small share of assets invested in private capital. There is therefore a compelling opportunity within the private wealth sphere for managers across private equity, private credit, infrastructure and real estate strategies.

The shift is already well underway. Over the past decade, regulatory developments and product innovation have significantly expanded access to private markets for high-net-worth investors. A growing range of structures is now available through private banks and wealth managers. However, with increased accessibility comes greater complexity.

The key question for many wealthy private investors is no longer whether to invest in private markets, but how to structure that exposure effectively.Jérôme Zahnen, Head of Private Equity Offering

Historically, private markets have been accessed primarily through closed-end funds. These structures align well with the illiquid nature of the underlying investments: capital is drawn over time and returned as portfolio companies are sold. As a result, fund lifecycles often extend over 10 to 15 years. For institutional investors, this structure works well. They have the expertise, resources and scale to manage diversified portfolios of closed-end funds and to maintain stable allocations over time. For private investors, however, building and managing such portfolios can be considerably more demanding. Capital is deployed gradually, allocations fluctuate as investments are realized, and maintaining a consistent exposure to private markets requires careful planning and ongoing capital commitment management.

In response to these challenges, evergreen funds, often described as semi-liquid (or semi-illiquid) private market funds, have gained significant traction in recent years. These structures allow periodic subscriptions, provide immediate exposure to a diversified portfolio and offer limited liquidity options, typically capped at around 3 to 5 percent of net asset value per quarter. For many investors, they represent a more accessible entry point into private markets. Evergreen funds allow capital to be deployed immediately and reduce the operational complexity associated with managing multiple closed-end fund commitments. However, it is important to recognize that evergreen funds remain fundamentally illiquid investments. Liquidity is conditional and can be suspended during periods of market stress where the main objective should be protecting the portfolio and (remaining) investors. In practice, evergreen funds should therefore be treated as part of the illiquid allocation within a portfolio. This is a crucial element and distributors such as Private Banks have a key responsibility in educating their clients and avoid mis-selling these products.

Performance considerations also matter. Because evergreen funds must manage liquidity buffers and continuous capital flows, they can experience a modest performance drag in comparison with closed-end funds that have no such lower-yielding liquidity allocations. In addition, evergreen funds are operationally complex, requiring a steady pipeline of investment opportunities, disciplined valuation frameworks and robust liquidity management capabilities. Not every private markets manager has the platform or experience to manage these structures effectively, and investors should pay close attention to alignment with institutional investors and equal deal access. As in traditional private equity, manager selection remains critical.

Given these characteristics, evergreen and closed-end funds serve distinct roles within a private markets portfolio. Evergreen funds can form the core of a private markets allocation. They allow investors to build diversified exposure relatively quickly, benefit from immediate capital deployment and rely on the manager to reinvest distributions over time. For investors seeking a stable and scalable entry point into private markets, this structure provides an efficient foundation.

Closed-end funds, by contrast, are ideally suited for the satellite component of the portfolio. They offer access to a broader opportunity set and to specialized strategies where top-tier managers can generate attractive alpha. This includes sector-focused strategies such as technology, as well as small- and mid-cap buyouts or niche areas within private credit and infrastructure. Because these funds are typically fully invested over time without the cash drag associated with liquidity management in evergreen structures, this can translate into higher expected returns over time.

Across both closed-end funds and open-ended funds, manager selection remains one of the most important drivers of long-term performance.

For investors with relatively modest allocations to private markets, evergreen funds may represent the most practical solution, as building a diversified portfolio exclusively through closed-end funds can be challenging. At the other end of the spectrum, ultra-high-net-worth investors with established private markets portfolios may continue to rely predominantly on closed-end funds. Most investors, however, benefit from combining both approaches.

Private markets offer compelling advantages, including diversification, access to structural growth opportunities and the potential for attractive long-term returns alongside traditional asset classes such as equities and bonds. At the same time, however, they remain complex and inherently illiquid investments. As access continues to broaden, the role of experienced investment partners becomes increasingly important. For private investors, successful private markets investing is not only about gaining access to the asset class—it is about structuring that exposure thoughtfully and selecting the right distribution partners that help guide investors through all the complexities described before. At Banque de Luxembourg a dedicated Private Markets team was established more than a decade ago and has since built extensive expertise and strong partnerships with leading private markets managers, enabling our clients to benefit from carefully selected investment opportunities.