Asked to outline the attractions of investing in evergreen funds, Neal Brooks, M&G’s Global Head of Distribution and Product, points to growing demand for flexible access to private markets from a wide range of investors.
To meet that demand M&G has, over recent years, expanded its range of evergreen funds which focus on private market assets within open-ended structures, designed with limited liquidity to accommodate investors’ needs for periodic access.
Typically, these funds allow for monthly inflows and quarterly redemptions with a 60- to 90-day deferral notice to manage liquidity demands effectively.
Brooks highlights that M&G first introduced a leveraged loan evergreen fund nearly 20 years ago, initially serving primarily institutional clients.
Meanwhile the past decade of outperformance by private markets, compared with public markets, has fuelled further demand for evergreen investment products.
“These funds appeal to clients who want private market exposure without the restrictions of closed-ended structures, like extended lock-in periods,” he says.
“Unlike traditional private equity, which typically requires capital to be committed for years, our evergreen funds allow for monthly or quarterly redemptions with advance notice, usually around 60 to 90 days,” he says.
As Brooks elaborates, the appeal of these structures is growing among clients who seek private asset exposure with limited liquidity, but not the stringent lock-up periods of traditional private equity.
Brooks says that while the term “evergreen” has recently gained traction, M&G had adopted the open-ended, limited liquidity model long before.
“We designed these structures to address demand from smaller institutions that preferred the flexibility of entering and exiting their investments without being locked into closed-ended funds,” Brooks explains.
Over time, he notes, interest has extended beyond institutions to high-net-worth individuals and wealth management clients who want to tap into private assets more freely.
Brooks highlights the expanding interest from high-net-worth and even mass-affluent investors in private asset funds.
However, accessing these funds hasn’t always been easy, as many clients are averse to illiquid, closed-ended structures, especially as they seek broader diversification within their portfolios.
“More and more clients want private market exposure in ways that better fit their liquidity needs,” he says. To this end, M&G has created several evergreen funds that draw on internal institutional investments, allowing new clients to join with fewer liquidity concerns.
In response to the growing interest, Brooks explains, M&G recently launched an ELTIF—a European structure that allows private market access for non-professional investors. Although regulatory nuances across countries have required M&G to adjust operational approaches for each market, he sees potential for these vehicles to tap into broader European markets.
Structuring and regulatory complexity are prominent concerns for M&G’s evergreen funds. “Unlike standard mutual funds, there’s less uniformity across the market. Every region interprets regulations differently,” Brooks notes, referencing variations in fund registration and platform access across European countries.
“For example, France, Italy, and Germany all have unique requirements, so we have to tailor our operational approach for each country.”
Brooks emphasizes that while liquidity management remains a factor, M&G has carefully designed its evergreen funds to avoid mismatches. He suggests that these funds are meticulously managed to ensure liquidity aligns with the needs of both the asset class and investor profile.
“Our aim is to keep liquidity and redemption terms in line with what’s sustainable and suitable for the investor,” Brooks says, stressing that the careful structuring prevents potential liquidity issues from arising.
He believes the demand for hybrid structures that combine elements of private and public markets will continue to rise. “Today’s wealth management clients are more accustomed to open-ended structures, so evergreen models are a natural fit.”
Brooks also points to trends in the US, where a significant portion of high-net-worth portfolios is allocated to alternatives, and he anticipates Europe and the UK will follow suit.
“In the US, wealth portfolios often include 20-30% in alternatives. Europe has room to grow, but I believe we’re moving in that direction,” he adds.
Shift in demand?
Investor demand remains a key motivator. “Many of our clients want to access private asset classes but are deterred by the closed-ended nature of traditional private equity or private credit funds,” Brooks explains. Additionally, he observes that institutional investors, such as defined contribution pension schemes, are increasingly interested in private asset exposure, further spurring demand for evergreen structures.
According to Brooks, the UK wealth market’s adoption of the LTAF- the UK’s post-Brexit equivalent to ELTIF – has been relatively slow, partially due to the presence of investment trusts, which already provide some degree of private market access.
However, he sees momentum in the institutional space, particularly within defined contribution pension schemes. He suggests that while the LTAF has institutional traction, it may take more time before it gains significant ground among retail investors.
Brooks foresees continued growth in evergreen structures, predicting that the demand for private market exposure will further drive the development of open-ended and evergreen models. “It’s ultimately about accessibility,” he says. “As private assets grow in prominence, the investment industry will continue innovating to ensure more flexible, accessible ways for investors to participate.”
This interview was first published as part of a major Evergreen Funds Industry Survey, produced as a collaboration between Funds Europe and Citco. The full report may be viewed here.
