It did not take long for the slump in software stocks to spill over into other corners of the financial market. In February, a US private credit manager halted redemptions on a $1.6 billion evergreen fund, caused by a combination of portfolio concentration and stress.1
Around a fifth of business development company loan books sit in software,2 a sector facing existential questions about AI disruption.
When investor confidence weakened, the structural features of semi-liquid vehicles amplified the pressure and raised an important question: are evergreen funds the right structure for illiquid assets?
The rise of evergreen funds
Evergreen funds are perpetual-life vehicles that raise and invest capital continuously while offering periodic liquidity to investors.
Unlike traditional funds with fixed commitments and finite terms, evergreen vehicles accept regular subscriptions (usually monthly) and offer quarterly repurchase windows to investors, often capped at around five per cent of net asset value.3
US evergreen private market funds held approximately $493 billion in net assets by the end of September 2025; with estimates this could exceed $1 trillion by 2029.4
The appeal is clear. Evergreen structures lower minimum investment thresholds, broaden investor access to private markets and provide regular income distributions. For wealth and retail investors, they are seen as more appealing than the long lock-up periods associated with closed-ended vehicles.
The structural issues investors should understand
However, not all evergreen structures offer the same level of liquidity.
Interval funds, regulated under the 1940 Act, are required to offer quarterly redemption windows. The fact that quarterly liquidity is mandatory, not discretionary, offers structural protection, although investors may still face delays in getting their money back.
Non-traded business development companies, by contrast, feature repurchase programmes that are subject to board discretion and can be suspended without warning.
It is also worth highlighting that the weighted average lives of US private credit portfolios are typically around four years.5 Most loans have bullet maturities where principal is repaid on the maturity date, while some loans incorporate payment-in-kind (PIK) features that defer cash interest until maturity. Such structures reduce the pace at which capital is returned to investors, increasing reliance on refinancing or secondary exits for liquidity.
This is a non-issue when inflows exceed outflows. It becomes more challenging if redemptions persist while fundraising slows.
Why emerging market assets could be a better fit
To be viable in all conditions, private credit evergreen funds need to meet three criteria: short-duration assets, diverse economic drivers and natural liquidity. This is where emerging market private credit could be a better fit than its US or European counterparts.
Emerging market private credit typically exhibits shorter weighted average lives than US direct lending – approximately 2.5 years versus four years.5 In vehicles exposed to trade finance and commodity-backed lending, durations can be shorter still. Hard-currency, self-liquidating trade loans often mature within 30 to 180 days, while direct loans may sit in the one-to-three-year range.6
Shorter maturities create natural liquidity. Capital is returned through amortisation and repayment rather than secondary sales or refinancing. That is vital for vehicles offering periodic liquidity.
Emerging markets also benefit from diverse economic and sector drivers. Deal flow is more frequently driven by financial services, consumer sectors, infrastructure, commodities and real assets. These exposures are linked to demographic growth, urbanisation, trade flows and infrastructure demand rather than private equity entry multiples or technology valuations.
Sector diversification does not eliminate risk. But it reduces reliance on a narrow set of return drivers, correlations are lower and vulnerability to a sector shock is materially reduced.
A way forward
Evergreen funds function effectively when liquidity expectations are realistic, underlying assets are matched to the structure and concentration risks are properly understood.
Recent events illustrate that liquidity mismatches reveal themselves during periods of stress, which turn structural features into structural vulnerabilities. In a market that has grown rapidly, structure deserves as much scrutiny as credit quality. Evergreen funds are not the issue. The issue is what’s inside them.
Endnotes
- Bloomberg, Blue Owl Anxiety Rattles $1.8 Trillion Private Credit Market, February 2026.
- Financial Times, Investors sour on listed credit funds over AI hit to software sector, February 10, 2026
- Gemcorp, Internal analysis on US evergreen funds, February 2026.
- Morningstar, The Rise of Evergreen Funds: A New Way to Access Private Markets, January 2026.
- Global Private Capital Association, Private Credit Outlook, December 2025.
