Managing Director
In brief:
- Assets managed by evergreen private markets funds have more than doubled from USD 267 billion in 2022 to USD 607 billion as of Q1 2026,¹ driven by demand for accessibility, diversification and simplified structures.
- As the evergreen universe expands, comparing options has become more difficult: funds that look similar on the surface can behave differently in practice, particularly across portfolio construction, deployment pacing and liquidity management.
- A repeatable evaluation framework can help investors SIFT through the expanding universe of evergreen funds and focus on the factors most likely to shape long-term outcomes: Strategy, Implementation, Flexibility and Transparency.
Introducing the SIFT framework
The SIFT framework draws from the perspective of J.P. Morgan's Private Equity Group (PEG), informed by more than 45 years of experience investing alongside private equity managers on behalf of institutional and individual investors. The table below highlights the four pillars of SIFT and key questions addressing each.
Strategy: differentiation and durability across environments
Strategy is the starting point because it defines the opportunity set, sources of return and conditions under which an approach is likely to succeed—or struggle. Strategies that depend heavily on low rates, elevated risk appetite or multiple expansion may be less durable when financial conditions tighten.
PEG has implemented the same strategy for decades, seeking to invest in high-quality small- and mid-market private companies alongside top-tier General Partners (GPs). This segment has historically produced attractive top-quartile returns. In fact, across mature vintage years 2011–2021, small- and mid-market private equity funds generated nearly 5% higher returns than large-cap funds over the same period.
Beyond return potential, small- and mid-market investments tend to be less reliant on leverage, multiple expansion and public-market exits to generate long-term value. PEG’s focus on this segment is a key differentiator among evergreen funds, particularly as capital has migrated to mega-funds that do not often compete for smaller deals. Many small- and mid-sized companies also remain well suited for private equity value creation, including operational professionalization, technology adoption (including AI) and add-on acquisitions. They also offer multiple potential exit avenues, including strategic buyers and well-capitalized large buyout firms seeking to deploy dry powder. For additional insights on this topic, see A big role for small and middle-market private equity investments.
Implementation: portfolio construction and liquidity are critical
Implementation is a critical success factor in evergreen funds because these vehicles must continuously balance two objectives: deploying capital into attractive opportunities and preserving enough liquidity to meet potential redemptions. In an evergreen structure, portfolio construction and liquidity management are inseparable and directly shape fund performance, particularly during periods of market stress.
A common implementation risk is over-allocating to private equity investments to reduce cash drag, while relying on leverage or unrealistic subscription assumptions to meet potential outflows. If redemption requests rise during weaker markets, the fund may be forced to sell assets at discounts to generate liquidity. Investors evaluating an evergreen vehicle should therefore examine the fund’s average cash position, future obligations, use of leverage and monthly cash flow trends. A potential red flag is when obligations and unfunded commitments exceed controllable liquidity, including cash and secured financing.
The key underwriting question is not simply whether an evergreen private equity vehicle offers periodic liquidity, but whether the manager can preserve that liquidity without compromising the investment mandate. This requires disciplined portfolio construction, operational readiness and the foresight to keep the strategy intact when other sources of liquidity become scarce.
A fund designed with these principles in mind would typically maintain at least 10% of its net asset value in liquid instruments to support potential redemptions without relying on excess leverage, fundraising inflows or favorable market conditions.
Flexibility: diverse capabilities support consistent deployment
Flexibility is key in evergreen structures because managers must deploy capital consistently across market cycles. The strongest platforms leverage multiple investment strategies while staying anchored to a clear mandate, disciplined underwriting standards and consistent portfolio construction.
PEG has strong capabilities across three types of investments: secondaries, co-investments and opportunistically, primaries, leveraging the platform’s network of 260+ active GP relationships to source over 1,000 deals per year across a wide range of strategies, sectors and geographies. This breadth and reach enable consistent deployment into investments with attractive risk-return characteristics across cycles, while maintaining selectivity and underwriting discipline. In today’s more challenging fundraising environment for small- and mid-market private equity firms, PEG’s longstanding relationships and broad mandate can also help source differentiated opportunities with potential for meaningful value creation. To learn more about how PEG is capitalizing on these dynamics, see Accessing Unique Private Equity Opportunities in the Small and Middle-Market.
Transparency: focus on terms and sustainable value creation
Investors should evaluate whether an evergreen fund provides clear, consistent information on total cost of ownership, underlying fees and expenses, liquidity terms, redemption mechanics, valuation practices and governance. Transparency is especially important in open-ended structures because liquidity features, valuation policies and deployment pacing can materially affect the investor experience over time. Recent instances of evergreen funds pro-rating withdrawals highlight the importance of manager selection, particularly the need for experienced teams with robust oversight, governance and valuation practices. It also reinforces the value of external valuation agents, which can provide independent input on portfolio values.
It is equally important to assess whether the fund’s return drivers are sustainable as the vehicle scales. Early results can be influenced by portfolio composition, timing and, in some cases, discounts on secondary investments. While secondaries can help build diversified exposure and mitigate the J-curve, investors should distinguish between returns driven by one-time purchase discounts and returns driven by post-closing value creation. While purchase-price discounts can support strong performance early in a fund’s life, longer-term outcomes are more dependent on the appreciation of underlying assets over time.
A more durable approach emphasizes investments in high-quality assets with the potential to compound value over time.
Closing perspective: an underwriting lens for a growing category
Evergreen private equity funds can be compelling vehicles for investors seeking private equity exposure. However, as the category grows, performance dispersion and structural differences are likely to become more pronounced, making a repeatable underwriting framework even more crucial to helping advisors SIFT through the expanding universe of options and focus on what matters most.